Required Minimum Distributions: What Rochester Retirees Need to Do Before December 31

For decades, the goal with retirement accounts is to put money in and leave it alone.

Then at a certain age the rules flip, and the government starts requiring you to take money out whether you need it or not. Those withdrawals are required minimum distributions, and the deadline for this year’s is December 31.

For retirees in Rochester, Greece, and Monroe County, this is one of the few tax matters where inaction carries an automatic and steep penalty.

Why RMDs Exist

The logic is straightforward once you see it.

Traditional retirement accounts were funded with money that was never taxed. You deducted the contributions, the balance grew untaxed for years, and the deal was always that taxes would come due when the money came out.

Required minimum distributions are how that promise gets enforced. Without them, someone could leave a large balance untouched indefinitely and pass it along having never paid tax on it.

Which Accounts Are Affected

RMDs generally apply to tax-deferred accounts, including:

• Traditional IRAs
• SEP and SIMPLE IRAs
• 401(k), 403(b), and most other employer plans
• Inherited retirement accounts, which follow their own separate and often stricter rules

Roth IRAs do not require distributions during the original owner’s lifetime, which is one of their significant advantages. Inherited Roth accounts, however, can carry distribution requirements of their own.

Know Which Age Applies to You

This is genuinely confusing right now, and it is not your fault.

The age at which RMDs begin has been changed twice by legislation in recent years, moving from 70 and a half to 72 and then to 73, with a further increase scheduled down the road. Which age applies to you depends on your birth year.

The practical takeaway: do not rely on what a friend told you or what was true when you started planning. Confirm the age that applies to your specific situation.

There is also a first-year quirk. In the year you first become subject to RMDs, you can delay that initial distribution into the following April. It sounds appealing, but it means taking two distributions in one calendar year, which can push you into a higher bracket. Often it is better to take the first one on time.

The Penalty for Missing One

This is why RMDs deserve attention rather than good intentions.

Failing to take a required distribution triggers a penalty on the amount you should have withdrawn. Recent legislation reduced the penalty from its historically punitive level, and it can be reduced further if the shortfall is corrected promptly, but it remains a meaningful hit for what is often simple oversight.

There is a process for requesting relief when a distribution was missed for reasonable cause and is corrected. If you realize you have missed one, act quickly rather than hoping it goes unnoticed.

The Aggregation Rules Trip People Up

If you have several retirement accounts, pay close attention here, because the rules differ by account type.

With traditional IRAs, the amount is calculated for each account, but you may total them and take the entire distribution from whichever IRA you choose. That flexibility is useful.

Employer plans like 401(k)s do not work that way. Each plan generally requires its own distribution, taken from that specific plan.

Someone with two IRAs and two old 401(k)s cannot simply take one large withdrawal and call it done. This is one of the most common sources of accidental shortfalls.

Give It Away Instead

If you are charitably inclined and do not need the money, a qualified charitable distribution is worth understanding.

It allows you to send funds directly from an IRA to a qualifying charity. The amount can count toward satisfying your required distribution, and it is excluded from your income rather than being taken in and deducted.

Keeping that income off your return can matter beyond the tax itself, since a number of thresholds, including certain Medicare premium calculations and the taxable portion of Social Security, are tied to income levels.

The transfer has to go directly from the account to the organization, and there are eligibility requirements, so the details matter.

Plan the Withdrawal, Do Not Just Take It

An RMD is a taxable event, and it lands on top of everything else on your return.

A few things worth thinking through: whether to have taxes withheld from the distribution, how the added income affects the taxability of your Social Security, whether it pushes you past a threshold that affects Medicare premiums two years later, and how it interacts with any capital gains you are planning to realize.

None of this means you should avoid the distribution. It means the timing and the withholding are worth a moment of thought rather than a reflexive December transaction.

Do Not Wait Until the Last Week

December 31 is a hard deadline, and financial institutions are busy at the end of the year.

Requests submitted in the final days can run into processing delays, holidays, and closed offices. If the distribution does not actually occur by the 31st, the deadline is missed regardless of when you asked for it.

Early December is a much safer target.

How We Help Rochester Retirees

RMDs sit at the intersection of tax planning and retirement income, and small mistakes are surprisingly costly.

Through our work with individuals and families, we help Rochester and Monroe County retirees confirm what is required, coordinate distributions across multiple accounts, and think through the tax consequences before the money moves.

For households with several accounts or with inherited IRAs in the mix, that coordination is where most of the value is.

The Bottom Line

Required minimum distributions are not optional, and the penalty for missing one is entirely avoidable.

Confirm which age applies to you, understand that IRAs and employer plans follow different aggregation rules, consider a qualified charitable distribution if you give anyway, and get it done in early December rather than the final week.

It is a deadline, not a decision. Treat it that way and it stays simple.

Questions About Your Required Distributions?

If you are unsure what you need to take or how it affects your tax picture, we are glad to walk through it.
Contact us well before December 31.

Disclaimer: This article is for informational purposes only and should not be considered tax, financial, or legal advice. Individual circumstances vary. Always consult a qualified professional regarding your specific situation.