The Baby Boom generation is now, in 2025, solidly within retirement age, with the youngest being 61 and the oldest 79. This generation has been responsible for some of the biggest innovations and rapid changes in American history. But that independent streak can have its downside.
At One Financial Services, we work with many successful retirees who have reached the age at which the IRS requires distributions from Retirement Funds such as IRAs, Annuities, and 401Ks to begin.
At the age of 73 whether you need the funds or not, you must begin making withdrawals from these retirement accounts. Seveny-three is the age the IRS will start taxing funds that have not previously been eligible.
Many of One Financial Services’ clients age 73 and older satisfy that requirement because they are already taking monthly income from their accounts. But, for those who reach age 73 and have not yet accessed those funds, you must start to take at least the minimum withdrawal.
When to take your required distribution is an interesting question. The OFS approach is best described as “Since it is required, let’s get it done early”.
You might be tempted to put off the required distribution until later in the year. Perhaps so it will coincide with the holidays or provide funds for a fall or late-in-the-year travel experience.
We understand the rationale of deferring it. It’s a taxable event and do it as late as possible. However, we prefer to counsel our clients to make the required withdrawal early in the year.
Why? If it is not taken, there are significant penalties. The penalty for not taking the Required Minimum Distribution is 50% of the RMD. Ouch!
Our firm works with many retirees who have reached the age of 73. We process a lot of required distributions, and our team are methodical in making sure everyone is notified subject to this requirement.
There is another reason we urge our clients to take their RMD early, one that is sometimes hard to think about. Should you decide to defer your RMD to late in the year, and you experience an unexpected health event, your beneficiaries will be required to complete the RMD from their inheritance.
Not the most uplifting scenario, but we emphasize that the story is real and has happened within our firm multiple times.
When it does, our One Financial team does our best to meet with your beneficiaries, allocate your IRA to each of them, explain what a required distribution is, and help them understand that they need to take from their newly inherited IRA before the end of the year because you preferred to wait until the end of the year to process your required distribution but didn't have a chance to because of your passing.
We would prefer to not have it insert a relatively complicated financial transaction such as a Required Minimum Distribution in a compressed amount of time before the year ends when your family will be grieving your loss.
At One Financial Services, we acknowledge a taxable event is not something to look forward to, and we understand the temptation to put off or defer the decision. However, we urge you to help us and your family to not be in that situation.
Your One Financial Services advisor will assist you in processing your RMD early!