If you turned 73 this year and have money sitting in a traditional IRA or 401(k), the IRS expects its cut—and it may be bigger than you think.
Required Minimum Distributions, or RMDs, force retirees to withdraw a set amount from tax-deferred accounts each year once they hit a certain age.
Miss the deadline, and the penalty is brutal: 25% of the amount you should have taken, dropping to 10% only if you fix it fast.
The rules changed under the SECURE 2.0 Act, and plenty of Americans are still working off outdated information.
The starting age is now 73 for most people, rising to 75 in 2033.
If you were born in 1959, you fall into a confusing transition window that has tripped up even tax pros.
The bottom line: waiting until 72 or 70½ like the old days could cost you.
The IRS divides your account balance from the prior year-end by a life expectancy factor.
At 73, that divisor is about 26.5, so a $500,000 IRA means a required withdrawal of roughly $18,900.
That entire amount counts as taxable income for the year—which can push you into a higher bracket, inflate your Medicare premiums, and even trigger taxes on Social Security benefits.
The sneaky part is that many retirees don't need the money.
They've got pensions, rental income, or a spouse still working.
But the IRS doesn't care about your budget—it cares about collecting taxes that have been deferred for decades.
That's why financial planners increasingly push "Roth conversions" in the years before RMDs kick in, filling up lower tax brackets on purpose.
If you're still working and your 401(k) is with your current employer, you may qualify for an exception that lets you skip RMDs on that specific account.
And if you inherited an IRA from someone who died after 2019, different—often harsher—rules apply, generally requiring you to drain the account within 10 years.
You must take your first RMD by April 1 of the year after you turn 73—but every RMD after that is due by December 31.
Double up in that first year and you could land in a higher tax bracket twice over.
Automatic distribution plans through your brokerage can help you avoid the 25% penalty, which is the single biggest mistake retirees make.
There's also a charitable angle worth knowing.
Qualified Charitable Distributions let you send up to $105,000 per year (indexed for inflation) directly from an IRA to charity, satisfying your RMD without adding a dime to your taxable income.
For retirees who give to church or nonprofits anyway, it's one of the few genuinely free lunches in the tax code. **The takeaway:** RMDs aren't optional, and the penalties are steep enough to wreck a retirement budget.
Final Thoughts
Whether you're 55 or 75, it's worth a 20-minute call with a tax professional to map out your withdrawal timeline before the IRS maps it for you.