If You're Retired, You Must Do This Before Dec. 31

It's hard to believe that 2025 is almost at an end. But before you know it, you'll be carving turkey, hitting the mall for last-minute holiday shopping, and gathering to open gifts.

Given that there are only a handful of weeks left in 2025, now's the time to get your financial house in order. And if you're retired, there's one key move you should make before 2026 begins.

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Don't neglect your RMD

If you have savings in a traditional retirement account and you're 73 or older, you may be on the hook for a required minimum distribution, or RMD, this year. Traditional retirement plans like IRAs and 401(k)s mandate RMDs because the IRS wants the money to come out of your account eventually. It does not want IRAs and 401(k)s to become tools used by well-off Americans to pass down wealth in a tax-advantaged manner.

If your retirement account makes you take RMDs, your first one is due by April 1 the year after you turn 73. So if you turned 73 this year, you have until April 1, 2026 to take your initial RMD.

However, if this isn't your first RMD, you must take that distribution by Dec. 31. If you don't, you could risk a 25% penalty on the sum you were supposed to withdraw (though the IRS may reduce it to 10% if you correct that mistake quickly enough).

Your RMD is calculated each year based on your account balance and life expectancy. The financial institution holding your retirement account will generally be able to calculate your RMD for you. If that's not the case, and you're not sure how to calculate it, a financial advisor can help.

What if you don't need your RMD?

For some retirees, RMDs aren't a problem because they're already taking distributions from their savings. RMDs are more of an issue for people who don't need the money, since they create an immediate tax burden.

If you don't need your RMD, one thing you may want to consider is a qualified charitable distribution (QCD). With a QCD, money is transferred directly from your retirement account to a registered charity, allowing you to satisfy your RMD while excluding that money from your taxable income.

Another option is to take your RMD and reinvest it in a traditional brokerage account, CD ladder, or other money-making vehicle of your choice. (You just can't put the money back into a tax-advantaged account.) That won't get you out of paying taxes on that sum, but that way, at least it won't go to waste.

You may not have to take your RMD

Generally, you have to take yearly RMDs starting at age 73. However, if you're still working, you're typically exempt from taking an RMD from your current employer's retirement plan, provided you don't own 5% or more of the company.

Keep in mind, though, that this exception only applies to your current workplace plan. Let's say you're old enough to be liable for RMDs, but still work for a company whose 401(k) you contribute to. Let's also assume you have no ownership stake in the company.

In that case, you shouldn't have to take an RMD from that 401(k). But if you have a separate IRA, that account would still be subject to RMDs.

Don't wait till the last minute

Dec. 31 will be here before you know it. If you have to take an RMD, start making arrangements for that withdrawal sooner rather than later. You don't want to delay too long and wind up with a penalty on your hands as a result.

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