It’s hard to believe, but we’re just a few weeks away from 2025, and that means the clock is ticking on 2024 required minimum distributions (RMDs). They’re required annual withdrawals most workers 73 and older have to take from their accounts so Uncle Sam can finally get his tax cut of those savings.

Those who just turned 73 in 2024 technically have until April 1, 2025 to make their 2024 RMD. There’s also an exception for workplace retirement plans if you’re still working and own less than 5% of the company. But if neither of those things applies to you, Dec. 31 is your deadline. If you haven’t already taken your RMDs, you’ll want to act fast, but be sure to avoid the following four costly mistakes.

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1. Not taking your full RMD

RMDs force you to withdraw money from your retirement accounts and pay taxes on it before you die. This might not be ideal, especially if your RMDs far exceed the amount you actually need to live on. But not taking them is much worse.

The government will assess a 25% penalty on the amount you were required to withdraw, but didn’t. For example, if you were supposed to take out $5,000, but only took out $4,000, the government will penalize you $250 on the remaining $1,000. You may be able to get this penalty down to 10% if you correct the mistake within two years.

You’re often better off by withdrawing the funds and paying the taxes (or doing a QCD, described below) rather than avoiding RMDs altogether.

2. Not taking withdrawals from each of your 401(k)s

RMDs are straightforward when you only have one or two retirement accounts. But they can quickly get complicated for those with multiple IRAs and 401(k)s. These two account types have different rules.

As mentioned above, you may skip RMDs from your 401(k) for your current employer if you’re still working and own less than 5% of the company. However, you cannot do this for 401(k)s held by previous employers, and it’s not an option with IRAs at all.

IRAs also have a special rule that permits you to take of all your IRA RMDs from a single account if you like. For example, say you have two IRAs, one with a $5,000 RMD and one with a $7,000 RMD. You could take $12,000 from one, $6,000 from each, or any combination you like as long as you withdraw at least $12,000 from your IRAs during the year.

However, 401(k)s require you to take RMDs from each one individually. If you try to take all of your 401(k) RMDs from a single account, you’ll owe a penalty for the 401(k) you didn’t withdraw any money from.

3. Thinking you still need to take Roth RMDs

Roth IRAs have long been exempt from RMDs, and beginning this year, Roth 401(k)s are as well. This makes sense because you fund Roth accounts with after-tax dollars and your withdrawals are generally tax-free. So the IRS has no incentive to force you to withdraw money from these accounts since it won’t get a cut anyway.

This doesn’t mean you can’t withdraw money from these accounts if you want to, though. Roth withdrawals can be especially helpful this time of year if you’re nearing the top of your tax bracket because they won’t raise your taxable income.

4. Taking your RMD and donating it to charity instead of doing a qualified charitable distribution (QCD)

The IRS permits adults 73 and older to make a qualified charitable distribution (QCD) instead of taking an RMD if they’d rather not raise their tax bill. This involves a direct transfer from your retirement account to a qualifying charity in the amount of your RMD. If you do this, the government won’t penalize you or tax you on those funds.

You might think that’s pretty much the same as withdrawing your RMD yourself and then donating it to a qualifying charity, but there are a few key differences:

• If you donate on your own, you have to itemize deductions to claim the charitable donation deduction, which isn’t always best for you. QCDs are available to those who choose the standard deduction.
• When you withdraw the RMD yourself, it’s considered taxable income to you, which increases your adjusted gross income (AGI). A charitable donation deduction partially offsets this, but a QCD doesn’t raise your AGI at all.
• The charitable donation tax deduction is limited based on your AGI and the type of charity to which you donate. A QCD doesn’t count toward these limits, which may allow you to give more and reduce your taxable income further.

To count as a QCD, the donation must be to a qualifying tax-exempt charity. You’ll also need to keep receipts proving your donation. The maximum QCD for 2024 is $105,000. Also note that this is only an option for seniors. Younger adults who have to take RMDs on inherited retirement accounts cannot do this.

If you have any questions about how RMDs will affect your 2024 taxes, consult a tax professional who can give you advice on your specific situation. Act fast so you have time to complete your RMDs or QCDs before the end of the year.

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