If you turned 73 this year, the IRS has a message for you: it's time to start pulling money out of your retirement accounts, whether you need it or not.
These are called required minimum distributions, or RMDs, and they apply to traditional IRAs and most workplace plans like 401(k)s.
The IRS charges 25% of the amount you should have withdrawn, dropping to 10% if you fix it quickly.
On a $10,000 missed withdrawal, that's up to $2,500 gone for a paperwork slip.
Here's the part that catches people off guard: you don't have to spend the money.
You just have to move it out of the tax-deferred account and into a regular brokerage account or your bank.
You'll owe income tax on the withdrawal, but you keep the cash.
The size of your RMD isn't a fixed number.
The IRS divides your account balance by a life expectancy factor that changes with age.
At 73, that factor is about 26.5, so a $500,000 balance means roughly $18,900 must come out.
By your mid-80s, the divisor shrinks and the required percentage grows.
If you're still working and own a 401(k) at that job, you may be able to skip RMDs on it until you retire.
That exception doesn't apply to IRAs or to old 401(k)s from former employers.
One of the most useful moves is a qualified charitable distribution.
Once you're 70½, you can send up to $105,000 per year from an IRA directly to charity.
That money counts toward your RMD and never shows up as taxable income, which can also help keep your Medicare premiums from climbing.
Your first RMD can be delayed until April 1 of the following year, but then you'd take two in the same tax year.
That double hit can push you into a higher bracket and raise your Medicare Part B and D surcharges.
For most people, taking the first one in the year they turn 73 keeps things simpler.
A few practical steps can save real money.
Set a calendar reminder for early December so you're not scrambling on December 31.
Ask your broker about automatic distributions so the calculation happens without you.
And if you have multiple IRAs, remember you can total the RMDs and take the whole amount from one account — just don't try that trick with 401(k)s, which must each be handled separately.
Also worth knowing: Roth IRAs have no RMDs during your lifetime, which is why some savers convert traditional balances before age 73.
The conversion itself triggers tax, so it pays to run the numbers or talk to a tax pro before making a move.
The bottom line is that RMDs are less a retirement perk and more a deadline with a penalty attached.
A little planning in your early 70s can mean thousands of dollars staying in your pocket instead of going to the IRS.
Final Thoughts
Treat the December reminder as seriously as you'd treat any other bill — because in a way, that's exactly what it is.