If you turned 73 this year, the IRS expects a slice of your retirement account whether you need the money or not.
Required minimum distributions, or RMDs, are the government's way of finally collecting taxes on money that has grown tax-deferred for decades.
Miss the deadline, and the penalty is steep — though recent law changes have softened the blow.
Once you hit your required beginning date, you must withdraw a minimum amount from traditional IRAs, 401(k)s, and most other workplace plans each year.
The amount is based on your account balance at the end of the prior year divided by a life expectancy factor from an IRS table.
The older you get, the larger the percentage you must pull out.
The SECURE 2.0 Act pushed the starting age to 73 for people born between 1951 and 1959, and to 75 for those born in 1960 or later.
That gives some savers extra years of tax-deferred growth — but it also means larger balances and bigger future withdrawals when the clock finally starts.
The penalty for skipping an RMD used to be a brutal 50% of the amount you should have taken.
Under the new rules, it dropped to 25%, and it falls to 10% if you correct the mistake quickly and file the right paperwork.
Still, that is money you hand to the IRS for no good reason.
Roth IRAs have no RMDs during the owner's lifetime, which is a big reason they are popular for estate planning.
But a 401(k) may still require withdrawals even if you are working past 73, depending on whether you own less than 5% of the company.
If you have multiple IRAs, you can total the RMDs and take the whole amount from one account — but that flexibility does not apply across 401(k)s.
The first-year deadline is the one that catches retirees off guard.
You can delay your very first RMD until April 1 of the following year.
Sounds helpful, but it means taking two taxable withdrawals in the same calendar year, which can push you into a higher bracket or trigger higher Medicare premiums.
There is also a strategy worth knowing about.
If you do not need the cash, you can direct your RMD to a qualified charity through a qualified charitable distribution.
That can satisfy the requirement and keep the amount out of your taxable income.
Check whether your starting age is 73 or 75.
Ask your plan administrator or IRA custodian how they handle automatic distributions, because some do it for you and some do not.
And if you are unsure, a one-time conversation with a tax professional costs far less than a penalty.
The bottom line: RMDs are not optional, but they are manageable with a little planning.
Final Thoughts
Knowing your start age and your deadline beats a surprise tax bill every time.