If you turned 73 this year, the IRS has a message for you: it wants its cut of your retirement savings, whether you need the money or not.
That's the reality of required minimum distributions, or RMDs — the mandatory withdrawals that kick in once you hit a certain age.
Once you reach RMD age, you must pull a minimum amount out of traditional IRAs, 401(k)s, and most other tax-deferred accounts every year.
Skip it, and the penalty is steep: 25% of the amount you should have withdrawn, though it drops to 10% if you fix the mistake quickly.
The age has shifted in recent years, which has tripped up plenty of savers.
Under current rules, most people start at 73.
Those born in 1960 or later will start at 75.
If you're unsure which applies to you, check with your plan administrator or a tax professional before December 31 rolls around.
Here's the part that catches people off guard.
You don't have to need the money to owe the tax.
The withdrawal lands in your income for the year, which can push you into a higher bracket, raise your Medicare premiums, and even make more of your Social Security taxable.
Retirees who spent decades saving carefully sometimes watch a chunk of that work get clawed back by taxes they never planned for.
The math itself isn't complicated, but it's not guesswork either.
You divide your account balance by a life expectancy factor the IRS publishes each year.
As you age, that factor shrinks, which means your required percentage grows.
By your mid-80s, you could be forced to withdraw well over 5% of your balance annually, even in a down market.
If stocks are tanking, you still have to sell.
Many financial planners recommend keeping one to two years of RMD cash in safer holdings so you're not dumping shares at the worst possible moment.
A few practical moves can soften the blow.
First, if you're still working and own a 401(k) at that job, you may be able to delay RMDs from that specific plan until you actually retire.
Second, the first year comes with a grace period: you can take your first distribution by April 1 of the following year, though that means two taxable withdrawals in one year.
Third, if you're charitably inclined, a qualified charitable distribution lets you send up to $105,000 directly from your IRA to a charity, and that amount counts toward your RMD without adding to your taxable income.
What you can't do is ignore the deadline.
Miss it and you'll owe that penalty on top of the tax.
Set a calendar reminder, confirm your balance on December 31 of the prior year, and double-check that any withdrawal made in your name actually left the account.
One more wrinkle: not every account follows the same clock.
Roth IRAs have no RMDs during the owner's lifetime, but Roth 401(k)s do, at least under current law.
Inherited IRAs come with their own rules that depend on who you are and when the original owner died.
For anyone juggling a mortgage, rising grocery bills, and a fixed income, an unexpected tax bill is the last thing you need.
But a little planning now beats a penalty letter later.
The bottom line: RMDs aren't optional, but they are manageable.
Final Thoughts
Talk to a tax pro about your specific accounts, keep cash on hand for the withdrawal, and treat the deadline like any other bill — one you schedule for, not one that surprises you.