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Retirement Planning

Year-End RMD Planning: Don’t Miss the December 31 Deadline

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As summer winds down and fall approaches, it’s time to put year-end financial deadlines into focus. For retirees taking Required Minimum Distributions, December 31 is the deadline for your annual withdrawal. Reviewing your plan in September sets you up for success well before the deadline arrives.

Key Takeaways

  • Most retirees must take their Required Minimum Distribution by December 31 each year. Missing this deadline triggers a significant IRS penalty.

     

  • If you’re turning 73 this year, you have a one-time option to delay your first RMD, but doing so comes with a tax trade-off worth considering before you decide.

     

  • RMD planning is an opportunity to manage your tax bracket, Medicare premiums, and long-term financial plan.

What Is an RMD?

A Required Minimum Distribution (RMD) refers to the amount the IRS requires you to withdraw annually from most tax-deferred retirement accounts. Because contributions to these accounts were made pre-tax, the IRS requires distributions, and collects taxes on them, starting at a designated age.

Under the SECURE Act 2.0, the RMD starting age is 73 for anyone born before 1960. As of 2033 the age will increase to 75 for those born in 1960 or later beginning.

Which Accounts Require RMDs?

Account Type RMD Required?
Traditional IRA, SEP IRA, SIMPLE IRA Yes. RMD deadline is April 1 of the year after you reach RMD age
401(k), 403(b), 457(b) plans Yes. RMD deadline is April 1 of the year after you reach RMD age (could be delayed if still working and you don't own more than 5% of the business)
Roth IRA No. RMDs are not required during your lifetime
Roth 401(k), 403(b), or 457(b) No. RMDs are not required
Inherited retirement accounts Rules vary and are complex. Consult an advisor.

The December 31 Deadline

For most retirees, the annual RMD deadline is December 31, but there is one exception. If you’re taking your very first RMD, you have the option to delay until April 1 of the following year.

Before choosing to delay, understand the trade-off. Pushing your first RMD into the following year means taking two distributions in the same calendar year. You’ll take your delayed first RMD and your second RMD both before December 31 of that year. Two distributions in one year means double the taxable income, which can push you into a higher tax bracket, increase taxes on Social Security benefits, and trigger IRMAA surcharges on Medicare premiums.

For many retirees, taking the first RMD before December 31 of the year they turn 73 spreads the tax impact across two calendar years and avoids those compounding consequences. That said, the right choice depends on your individual tax situation.

What Happens If You Miss the Deadline?

The IRS penalty for missing an RMD is significant. If you fail to take your full required distribution by the deadline, the IRS can impose a 25% excise tax on the amount you should have withdrawn but didn’t.

There is some relief available. The penalty can be reduced to 10% by filing Form 5329 and taking the missed distribution within the IRS correction window. While that’s an improvement, it’s still a costly and avoidable mistake.

Connecting RMDs to Your Broader Tax Strategy

Meeting the deadline is the minimum. The real opportunity is using your RMD strategically.

Retirees with charitable goals should consider Qualified Charitable Distributions (QCDs), which allow you to transfer funds directly from your IRA to a qualified charity. QCDs count toward your RMD requirement without adding to your taxable income. It’s a meaningful advantage for those who don’t need the full distribution for living expenses.

For those with flexibility in their income, coordinating your RMD amount and timing with other income sources can help you manage your tax bracket more effectively across the year.

No matter what your specific situation may be, finalizing your RMD strategy earlier in the year gives you more options. Waiting until December leaves little room to course-correct.

Stay Informed All Year Long

Deadlines like this one are exactly why staying informed matters. Subscribe to our newsletter to get updates like these delivered directly to your inbox so important deadlines and planning opportunities never catch you off guard.

Advisory services offered through Secured Retirement Advisors, LLC. Secured Retirement Advisors is registered as an investment advisor with the Securities and Exchange Commission and only transacts business in states where it is properly notice filed, or is excluded or exempted from registration and/or notice filing requirements. 

Worth the Splurge?

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The Minnesota State Fair is just around the corner, and I’m already thinking about my first corn dog of the season. There’s something about fair food that defies all logic. I’d never pay $8 for a corn dog anywhere else, but walking through the fairgrounds on a sunny afternoon, surrounded by the smell of fried everything and the sound of the crowd? Suddenly it’s worth every penny.

That’s the thing about value. It’s rarely about the price tag alone. It’s about what you’re actually getting in return. Some things at the fair are worth the splurge, and others aren’t. Knowing the difference comes down to understanding your own goals.

I think about that concept a lot when it comes to retirement planning. Right now every financial headline seems to be about interest rates, Fed decisions, and whether now is the right time to make a move. There’s a lot of noise out there. It can be tempting to make short-term decisions based on where rates stand today or the fear of where they might go tomorrow.

The people who tend to navigate these moments well aren’t the ones reacting to every headline. They’re the ones with a long-term plan that gives them the confidence to tune out the noise and make a deliberate move when the time is actually right for them.

The right financial moves aren’t always the ones that look best right now. A decision that makes sense for someone else’s timeline and tax situation might not make sense for yours.

If you’re thinking about making a big financial decision, I’d encourage you to think about this: What are you actually optimizing for?

That’s what we talk about every week on the Secured Retirement Radio Show. Saturdays at 9 a.m. on AM 1130, we dig into the financial topics that actually matter to people approaching and living in retirement. From current events to tax-smart planning strategies, we share informed perspectives that help you make better decisions.

Tune in on Saturday mornings or visit SecuredRetirements.com/Radio-Show to listen online.

 

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

Should You Buy a Vacation Home in Retirement? What Minnesotans Need to Consider

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There’s nothing quite like a Minnesota summer, but as July winds down and the nights start cooling off, a familiar thought creeps in for many retirees: what if I could hold onto this feeling year-round?

A vacation home is an appealing idea, but is it a realistic one? There are several important factors to consider before making a decision.

The Real Cost of a Second Home

The purchase price is just the beginning. Owning a second home in retirement comes with a layer of ongoing costs that are easy to underestimate.

Insurance on a second home can be substantially higher than your primary residence. Flood insurance, wind coverage, and seasonal risks all factor in.

Maintenance and management add up quickly, particularly if the property sits vacant for months at a time. Routine upkeep, seasonal maintenance, and the occasional emergency repair are ongoing realities of ownership.

HOA fees and community costs apply to many popular retirement destinations and can range from modest to extreme depending on the amenities.

The general rule of thumb is to budget 1-2% of the home’s value annually for maintenance alone, before taxes, insurance, or utilities. On a $600,000 property, that’s a significant annual line item in your retirement budget.

Tax Implications Worth Understanding

The tax picture for a second home is different from your primary residence in several important ways.

Property taxes on a second home are non-negotiable and vary significantly depending on location. Unlike a primary residence, many states offer fewer homestead exemptions on vacation properties, meaning you could be paying full assessed value with no relief.

Capital gains treatment differs from your primary residence. When you sell your primary home, an exclusion applies to gains: $250,000 for single filers and $500,000 for married couples filing jointly. That exclusion does not apply to a vacation home, meaning a property that appreciates over time could trigger a large capital gains tax bill when you sell.

Rental income considerations come into play if you rent the property seasonally. The IRS has specific rules governing how rental income and expenses are treated depending on how many days per year the property is rented versus personally used.

Making the Numbers Work: The Downsizing Strategy

For retirees who find the costs of a second home challenging to justify alongside a primary residence, downsizing can be a practical path forward. A house is often the largest asset retirees have outside of retirement accounts. That capital, deployed thoughtfully, can fund a vacation property purchase outright or significantly reduce the financing required.

The key is sequencing this decision carefully. Timing the sale of your primary residence, understanding your capital gains exclusion, and coordinating the proceeds with your broader retirement income strategy can make the difference between a financially comfortable outcome and an unnecessarily complicated one.

Questions to Work Through Before You Buy

A vacation home is a lifestyle decision as much as a financial one, but the financial piece deserves serious analysis first:

  • Can you afford the total carrying costs without meaningfully impacting your retirement income?

  • How does the purchase affect your liquidity and portfolio allocation?

  • Will you rent the property, and if so, have you modeled the tax implications?

  • Does a second home align with your estate planning goals?

  • Have you stress-tested your retirement plan against a down real estate market?

The Bottom Line

A vacation home can be a wonderful addition to retirement, but only when the numbers support it. The decision involves real estate, tax strategy, estate planning, and retirement income planning all at once. That’s not a decision to make based on a July afternoon on the dock, no matter how perfect it feels.

At Secured Retirement, we help clients think through major financial decisions like this within the context of their complete retirement plan. If you’re considering a second home and want to understand how it fits your bigger picture, let’s talk.

Give us a call at 952-460-3290. We’ll help you make sure the dream makes financial sense before you sign on the dotted line.

Advisory services offered through Secured Retirement Advisors, LLC. Secured Retirement Advisors is registered as an investment advisor with the Securities and Exchange Commission and only transacts business in states where it is properly notice filed, or is excluded or exempted from registration and/or notice filing requirements. 

The Freedom You’ve Actually Earned

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There’s something about the Fourth of July that puts me in a reflective mood. Between the fireworks and the festivities, I find myself thinking about what freedom actually means. Not just as a country, but as individuals.

We celebrate freedom every year on the Fourth. But as our founding fathers knew, freedom doesn’t happen overnight. It has to be built deliberately and financial freedom is no different. 

For most people, retirement is the light at the end of the tunnel. It’s what keeps you showing up, grinding through the long weeks, and making sacrifices for 40-plus years. You tell yourself that one day, you’ll have the time to travel, spend time with grandkids, pursue the hobbies you’ve been putting off, and finally live life on your own terms.

But simply getting to retirement and having financial freedom in retirement are two very different things.

You can reach the finish line and still feel constrained. Still watching every dollar. Still hesitant to book the trip or make the purchase because you’re not sure if the money will last. That’s not the retirement you spent four decades working toward.

True financial freedom in retirement means having the confidence to spend on what matters to you without anxiety, without second-guessing, and without running out. It means your savings are structured in a way that generates reliable income, manages taxes efficiently, and gives you flexibility when life doesn’t go according to plan.

Even if you’ve saved diligently, that kind of freedom doesn’t happen automatically. It requires a plan that translates everything you’ve accumulated into a retirement strategy that works for your goals. 

So as the fireworks fade and summer rolls on, it’s worth asking yourself: what does freedom in retirement actually look like? And do you have a strategy in place to make it a reality?

You’ve already done the hard part. Let’s make sure the finish line is everything you imagined it would be. Give me a call at 952-460-3290. 

 

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

Simple Advice is the Best Advice

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Father’s Day felt a little different this year.

In a few weeks, my son will be moving across the country to attend college. It has me thinking a lot about legacy. Not just the financial kind, but the wisdom and advice I can pass down before he’s on his own. 

My dad had plenty of advice for me when I was heading out on my own. He talked about working hard, being honest, and never spending more than you earn. Now I find myself on the other side of that conversation, and I’m trying to figure out what advice fits the world my son is stepping into. It’s a different landscape than the one I navigated, but the fundamentals haven’t changed. 

Taking my dad’s approach, I’m keeping it simple: start early and think long-term. The habits you build now compound over time, for better or worse.

That last one is something I find myself coming back to a lot in my work too. Whether you’re transitioning into a new phase of life like I am, or just planning for the future, don’t let short-term thinking get in the way of what you’re really building toward. The decisions you make early set the tone for everything that follows. Don’t wait to do the things that matter.

Legacy is really about intention. It’s about making deliberate decisions today that reflect what you value and who you want to take care of tomorrow. I see it with clients all the time. The ones who planned ahead aren’t just more financially secure, they’re more at ease. They’re enjoying retirement rather than worrying about it. 

That’s what I want to model for my son. The people who plan ahead are the ones who get to enjoy what they’ve built. 

If you haven’t had a conversation about your financial future yet, whether with your advisor, your spouse, or even yourself, today is as good a time as any to start. Give me a call at 952-460-3290. 

Cup of Joe

CUP OF JOE

From Joe Lucey, Founder of Secured Retirement

There’s something about sitting down with a steaming cup of coffee that always kicks my day into high gear. And it’s not just because of the caffeine it sends coursing through my veins.

Throughout my career, some of my biggest revelations have come to me in conversation with my mentor over a cup of joe. Good conversation and personal connection can pick you up in a special way. It’s that feeling that I’m hoping to bring to you with my series, your Cup of Joe.

Do You Have Too Much Tied Up in Your 401(k)?

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If you’ve spent decades maxing out your 401(k) contributions, you’ve done what every financial expert told you to do. But can you have too much in tax-deferred accounts?

For many high earners approaching retirement, the answer is yes. What felt like smart saving during your working years can turn into a significant tax burden in retirement once RMDs kick in.

The Tax-Deferred Time Bomb

Tax-deferred accounts like 401(k)s and traditional IRAs are powerful wealth-building tools. But they come with a big catch. Every dollar you withdraw in retirement is taxed as ordinary income.

That might not sound concerning now, but RMDs are based on your account balance, not your actual income needs. A large distribution can push you into higher tax brackets, and a higher income affects your Medicare premiums through IRMAA surcharges. 

If most of your retirement savings sits in tax-deferred accounts, you have limited flexibility. You’re forced to make withdrawals on the IRS’s timeline (not yours), and you pay taxes at whatever rate applies that year.

The Case for Tax Diversification

Tax diversification means spreading your retirement savings across different account types so you have more control over your taxable income in retirement. There are three main types of retirement savings accounts and they all have different tax implications. When you have money in all three buckets, you can strategically choose where to pull from each year based on your tax situation.

Tax-deferred: Traditional 401(k) or Traditional IRA
Contributions reduce your taxable income now, but withdrawals are fully taxed in retirement. RMDs are required starting at age 73.

Tax-free: Roth 401(k) or Roth IRA
Contributions are made with after-tax dollars, but qualified withdrawals in retirement are completely tax-free. No RMDs required during your lifetime.

Taxable: Brokerage or Savings Accounts
No tax benefit on contributions, but more flexibility in how and when you access funds. Long-term capital gains are typically taxed at lower rates than ordinary income.

Strategies to Rebalance Before Retirement

If you’re still working and think you might be too concentrated in tax-deferred accounts, there are several strategies to start rebalancing:

Consider Roth 401(k) contributions. If your employer offers a Roth 401(k) option, consider splitting your contributions between traditional and Roth accounts. This can be especially beneficial if you expect to be in a higher tax bracket in retirement.

Explore Roth conversions. Converting traditional IRA dollars to a Roth IRA creates a tax bill now, but eliminates future RMDs and creates tax-free income later. This strategy works best during lower-income years or before RMDs begin.

Build taxable accounts. Contributing to a brokerage account doesn’t offer upfront tax benefits, but it gives you more flexibility in retirement and access to preferential long-term capital gains rates.

Use QCDs strategically. Once you’re over 70½, qualified charitable distributions allow you to send IRA money directly to charity, satisfying your RMD without increasing your taxable income.

Let’s Review Your Strategy

If you’re concerned about having too much tied up in tax-deferred accounts, now is the time to evaluate your options. A comprehensive tax diversification strategy takes into account your current income, projected RMDs, retirement timeline, and long-term tax outlook.

At Secured Retirement, we specialize in helping clients build tax-efficient retirement strategies that give them more control and flexibility.

If you’re ready to review your account mix and explore ways to minimize your future tax burden, let’s talk. Give us a call at 952-460-3290. 

Advisory services offered through Secured Retirement Advisors, LLC. Secured Retirement Advisors is registered as an investment advisor with the Securities and Exchange Commission and only transacts business in states where it is properly notice filed, or is excluded or exempted from registration and/or notice filing requirements.