Required Minimum Distributions (RMDs) in 2025: What Eugene Retirees Need to Know
Retirement accounts come with a lot of rules, but one that often surprises people is the Required Minimum Distribution, or RMD. If you're wondering when and how much you have to withdraw from your savings once you hit a certain age, you're not alone. These mandatory withdrawals aren't just about taking money out; they're about timing, taxes, and avoiding penalties that can cost thousands.
For those focused on strategic retirement income management in Eugene understanding RMDs is essential for maintaining financial independence throughout your golden years. Let's break down what RMDs really mean and why they should be part of your retirement plan.
What Are Required Minimum Distributions?
Required Minimum Distributions are mandatory annual withdrawals from certain retirement accounts that begin at age 73. Think of them as the IRS's way of saying, "It's time to start taking money out and paying taxes on it."
Here's why they exist: tax-deferred retirement accounts like traditional IRAs and 401(k)s let you avoid paying taxes on contributions and growth for decades. Eventually, the government wants to collect income tax on these funds. RMDs ensure that happens by requiring you to withdraw a minimum amount each year based on your account balance and life expectancy.
The Consequences of Missing Your RMD
This isn't optional. Missing your RMD or withdrawing less than required triggers a penalty of up to 25% of the shortfall. If you catch and correct the error within two years, the penalty drops to 10%, but that's still a significant hit on top of regular income taxes.
Understanding RMDs helps you avoid these penalties while creating a sustainable withdrawal strategy for your retirement years.
When Do RMDs Start, and Which Accounts Are Affected?
The Age 73 Rule
You must begin taking RMDs from most retirement accounts once you reach age 73. Your first RMD can be delayed until April 1 of the year after you turn 73, but all subsequent withdrawals must happen by December 31 each year.
Quick Reference: Account Types & RMD Requirements
| Account Type | RMD Required? | Special Notes |
|---|---|---|
| Traditional IRA | Yes, at 73 | Can aggregate withdrawals across multiple IRAs |
| Roth IRA | No (owner's lifetime) | Required for beneficiaries after inheritance |
| 401(k) | Yes, at 73 | Still-working exception may apply |
| Roth 401(k) | Yes, at 73 | Can roll to Roth IRA to avoid RMDs |
| SEP IRA | Yes, at 73 | Treated like Traditional IRA |
| HSA | No | Not subject to RMDs ever |
One important exception: if you're still working at age 73 and own less than 5% of the company, you may delay RMDs from that employer's 401(k) until you retire. This can be valuable for Eugene professionals working at organizations like the University of Oregon or PeaceHealth who plan to work past traditional retirement age.
The Roth IRA Advantage
Roth IRAs stand out because they don't require distributions during your lifetime. This makes them powerful tools for tax planning and wealth transfer. However, inherited Roth IRAs follow different rules, with beneficiaries generally required to withdraw funds within ten years under current law.
Understanding which accounts trigger RMDs shapes your entire withdrawal strategy and helps you manage taxable income more effectively throughout retirement.
How RMDs Are Calculated
The Basic Formula
Your RMD calculation uses two factors:
Your retirement account balance on December 31 of the previous year
Your life expectancy factor from IRS tables (typically the Uniform Lifetime Table)
Simply divide your account balance by the life expectancy factor to find your minimum required withdrawal.
RMD Calculation Examples
Here's what actual RMD amounts look like at different ages:
| Age | Account Balance (Dec 31) | Life Expectancy Factor | Required Withdrawal |
|---|---|---|---|
| 73 | $500,000 | 26.5 | $18,868 |
| 75 | $480,000 | 24.6 | $19,512 |
| 80 | $420,000 | 20.2 | $20,792 |
| 85 | $350,000 | 16.0 | $21,875 |
As you can see, even though account balances may decrease over time, your required withdrawal amount can actually increase as your life expectancy factor gets smaller.
Multiple Accounts
If you have multiple IRAs, you must calculate the RMD for each account separately. The good news? You can aggregate the total and withdraw it from any one or combination of your IRAs. This flexibility lets you take your entire RMD from the account with the best liquidity.
However, 401(k)s and other employer plans don't allow aggregation. Each requires a separate RMD withdrawal from that specific account.
Getting Help with Calculations
While the math seems straightforward, changing regulations and special circumstances can complicate things. Most financial institutions provide RMD calculators, but working with an experienced advisor like Ryan Lew, CFP®, ensures accuracy and helps you avoid costly mistakes.
Tax Implications Every Eugene Retiree Should Know
Federal Tax Treatment
RMDs count as ordinary taxable income. This means they're taxed at your regular income tax rate, just like wages or Social Security benefits. The distribution gets added to your total income for the year, which could potentially push you into a higher tax bracket.
Oregon State Tax Considerations
Oregon taxes retirement income as ordinary income, with rates up to 9.9%. However, Oregon offers a retirement income credit for taxpayers 62 and older that can reduce your state tax liability. For Eugene residents, understanding both federal and state tax implications is crucial for effective RMD planning. Ryan Lew, CFP® at Tetralogy Financial Planning Group, specializes in helping local retirees understand how Oregon-specific tax rules impact their retirement withdrawal strategies.
Medicare Premium Impact
Because RMDs increase your taxable income, they can affect your Medicare Part B and Part D premiums through Income-Related Monthly Adjustment Amounts (IRMAA). Strategic planning can help minimize this impact.
Smart Strategies for Managing Your RMDs
Qualified Charitable Distributions (QCDs)
If you're 70½ or older, you can direct up to $100,000 annually from your IRA directly to qualified charities. This satisfies your RMD requirement without increasing your taxable income. Many Eugene retirees use QCDs to support local organizations like Food for Lane County or the Cascade Raptor Center while managing tax obligations efficiently. Ben Wenzel, CFP® at Tetralogy Financial Planning Group, specializes in helping clients align their charitable giving with tax-efficient retirement strategies, particularly for those interested in socially responsible approaches.
Roth Conversions Before Age 73
Converting traditional IRA funds to a Roth IRA before you reach RMD age reduces future mandatory distributions. You'll pay taxes on the conversion amount now, but the Roth funds grow tax-free and aren't subject to RMDs during your lifetime. This strategy can be particularly valuable for legacy planning and wealth transfer. Ben Wenzel, CFP® helps Eugene clients evaluate whether Roth conversions align with their long-term financial goals and values.
Timing Your Withdrawals
Taking distributions earlier in the year rather than waiting until December provides better cash flow management and helps spread out taxable income. It also gives you more flexibility if you need to adjust your withdrawal strategy based on market conditions.
Coordinating with Social Security
Some retirees delay claiming Social Security benefits to increase their monthly payments while managing RMD obligations. Ryan Lew, CFP®, works with Eugene retirees to coordinate Social Security timing with RMD planning for comprehensive retirement income management.
Get Personalized RMD Guidance in Eugene
Navigating Required Minimum Distributions can feel complex, but you don't have to figure it out alone. At Tetralogy Financial Planning Group, we help Eugene retirees develop withdrawal strategies that can help mitigate tax liability and align with your goals. Ryan Lew, CFP® and Ben Wenzel, CFP® bring local expertise and personalized attention to every client's unique situation.
Ryan, who was born and raised in Eugene, maintains close ties to the local business community and provides detail-oriented financial planning. Ben specializes in socially responsible investment models that align with Eugene's sustainability values while helping clients navigate complex retirement decisions.
Professional Eugene retirement income management means creating strategies that help your savings last while potentially reducing tax burdens and giving you confidence in your financial future.
We’d love to help you develop a strategy for managing your RMDs. Reach out to learn more about your options, and let’s discuss how we can support your retirement goals. Call us at (541) 600-3344 or book a complimentary consultation to get started today.
Frequently Asked Questions
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Yes! Qualified Charitable Distributions allow you to send up to $100,000 annually directly from your IRA to qualified charities. This satisfies your RMD while keeping the distribution out of your taxable income, making it perfect for supporting Eugene Symphony, local wildlife conservation, or other causes you care about.
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Calculate each IRA's RMD separately, but you can withdraw the total from any combination of your IRAs. This gives you flexibility to draw from accounts with better liquidity or investment positions.
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Oregon taxes RMDs as ordinary income, but offers a retirement income credit for those 62 and older. Working with a local advisor who understands Oregon-specific considerations helps you navigate both federal and state obligations.
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No, you cannot roll an RMD back into a tax-deferred retirement account. However, you can invest those funds in taxable accounts with ETFs, bonds, or other investments.
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If you're still employed and own less than 5% of the company, you may delay RMDs from that employer's 401(k) until retirement. You'll still need RMDs from IRAs and previous employer plans.
Tetralogy Financial Planning Group and LPL Financial do not provide legal advice or tax services. Please consult your legal advisor or tax advisor regarding your specific situation.
Disclosures
This material is for general information and educational purposes only and is not intended to provide specific advice or recommendations for any individual.
Investing involves risk including the loss of principal. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
A Roth IRA conversion—sometimes called a backdoor Roth strategy—is a way to contribute to a Roth IRA when income exceeds standard limits. The converted amount is treated as taxable income and may affect your tax bracket. Federal, state, and local taxes may apply. If you’re required to take a minimum distribution in the year of conversion, it must be completed before converting.
To qualify for tax-free withdrawals, you must generally be age 59½ and hold the converted funds in the Roth IRA for at least five years. Each conversion has its own five-year period, and early withdrawals may be subject to a 10% penalty unless an exception applies. Income limits still apply for future direct Roth IRA contributions.
