If you turned 73 this year—or you're getting close—there's a good chance the IRS is about to require you to pull money out of your retirement accounts, whether you need it or not.
It's called a Required Minimum Distribution, or RMD.
The rule applies to traditional IRAs, 401(k)s, and most other tax-deferred retirement plans.
Once you hit the trigger age, you must withdraw a minimum amount every year, and that withdrawal gets taxed as ordinary income.
Miss it, and the penalty is brutal: 25% of the amount you should have taken, dropping to 10% if you fix the mistake quickly.
That's a hit most retirees can't afford. **The age keeps moving** Under current law, RMDs kick in at 73 for most people.
Anyone born in 1960 or later will see the starting age rise to 75.
Roth IRAs don't require withdrawals during the owner's lifetime, though Roth 401(k)s now follow the same no-RMD rule as of 2024.
The math is straightforward but unforgiving.
The IRS divides your account balance by a life expectancy factor that shrinks each year.
At 73, that factor is about 26.5, meaning you'd withdraw roughly 3.8% of your balance.
By your mid-80s, the percentage climbs past 6%, and it keeps rising. **Why this catches people off guard** Many retirees assume they'll simply withdraw what they need.
Even if you're still working, even if you don't need the cash, and even if the market is down, the withdrawal is mandatory.
That forced income can push you into a higher tax bracket.
It can also trigger higher Medicare premiums through IRMAA surcharges, and it can make more of your Social Security benefits taxable.
For higher-income retirees, those ripple effects often cost more than the tax on the withdrawal itself. **Three moves worth considering before year-end** First, check whether you're actually required to take an RMD this year.
If you're still working and contributing to a 401(k) at your current employer, you may qualify for an exception on that specific plan—but not on IRAs.
Second, consider a Qualified Charitable Distribution.
If you're 70½ or older, you can send up to $108,000 this year directly from an IRA to a qualified charity.
It counts toward your RMD and stays out of your taxable income.
Third, look at Roth conversions in your early 70s.
Moving money while your tax bracket is lower can shrink future RMDs and reduce the tax bill your heirs face. **The deadline matters** RMDs are generally due by December 31 each year.
Your very first one can be delayed until April 1 of the following year—but that means taking two distributions in the same tax year, which can spike your income.
Set a calendar reminder for early December.
Brokerages get swamped, and processing delays near year-end are real. **Our take** RMDs aren't a penalty—they're the bill coming due on decades of tax deferral.
The retirees who handle them best are the ones who plan years ahead, not the ones scrambling in December.
Final Thoughts
A 30-minute conversation with a tax professional now could save thousands later.