Q I am retired and turning 73 in 2025. My brokerage company just informed me by letter that I am required to take a distribution from my traditional IRA account. I do not need the money and do not want to pay more taxes. Is there any way I can avoid taking a distribution?

A For those who turn 73 in 2025 and are retired, required minimum distributions (RMD’s) must begin no later than April 1, 2026 (the calendar year following the calendar year in which you attain the age of 73). If you decide to defer your first distribution until April 1, 2026, then you will have to receive a second minimum required distribution within the same year (2026). In other words, you will be doubling up on your taxable distributions in 2026. These distributions will be taxed at your ordinary income tax rates for both federal and state purposes. For those who have reached RMD age, but are not yet retired, they are not subject to the RMD rules until the calendar year following the calendar year in which they retire. The following are recent SECURE Act changes to RMD rules:

For those who reach age 72 after Dec. 31, 2022 and age 73 before Jan. 1, 2030, the RMD age would be 73. For those who reach 73 after Dec. 31, 2029 and age 74 before Jan. 1, 2033, the RMD age would be 74. For those who reach 74 after Dec. 31, 2032, the RMD age would be 75.

You can elect to have the entire amount distributed to you no later than the required beginning date or in a series of payments beginning no later than the required beginning date.

Payments may be made to you over your life or over the lives of you and your designated beneficiary, or over a period not extending beyond the life expectancy of you or the life expectancy of you and your designated beneficiary. The Internal Revenue Service provides life expectancy tables for this calculation. Generally, your administrator will provide you with the amount of your required minimum distribution. Failure to comply with the rules for minimum required distributions may expose you to an excise tax equal to 25 percent of the minimum required distribution (reduced to 10% if corrected, generally by the end of the second year that begins after the year of the missed RMD). As you can see, this can be quite an expensive penalty. However, the excise tax may be refunded if it can be shown that the insufficient distribution was due to a reasonable error and that steps are being taken to correct the insufficient distribution. The penalty is reported on Form 5329 (Additional Taxes on Qualified Plans (Including IRAs) and Other Tax Favored Accounts).

You also may want to consider a direct charitable contribution in lieu of receiving your Required Minimum Distribution. It would be wise to discuss these issues with your tax advisor to best strategize the most tax-advantaged timing and type of distributions.

Barry Dolowich is a certified public accountant and owner of a full service accounting and tax practice with offices in Monterey. He can be reached at (831) 372-7200. Please address any questions to Barry at PO Box 710 Monterey, CA 93942-0710 or email: bdolowich@gmail.com