If you turned 73 this year, the IRS has a message that comes with a deadline attached: your retirement account is now on a payout schedule, whether you need the money or not.
Required minimum distributions, or RMDs, are the annual withdrawals the government forces you to take from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts.
The rules shifted a few years ago under the SECURE 2.0 Act, pushing the starting age from 72 to 73 for anyone born between 1951 and 1959.
If you were born in 1960 or later, your trigger age is 75.
The catch that trips people up is the penalty.
Skip an RMD, or take too little, and the IRS can hit you with an excise tax on the shortfall.
That penalty used to be a brutal 50 percent.
It's now 25 percent, and it drops to 10 percent if you fix the mistake quickly.
The math isn't as simple as dividing your balance by your life expectancy.
The IRS publishes uniform lifetime tables, and your divisor changes every year.
At 73, the factor is about 26.5, meaning you'd withdraw roughly 3.8 percent of your prior year-end balance.
By your mid-80s, that percentage climbs past 6 percent, and it keeps rising.
What counts toward your RMD can get confusing when you hold multiple accounts.
If you have several traditional IRAs, you can total the required amounts and take the whole withdrawal from just one of them.
Each workplace plan generally has to pay out its own RMD separately.
Roth IRAs are exempt during your lifetime, though Roth 401(k)s now follow the same no-RMD rule thanks to recent changes.
Your first RMD is due by April 1 of the year after you turn 73, which sounds like a gift until you realize it means two taxable withdrawals landing in the same calendar year.
That double-up can push you into a higher bracket, spike your Medicare premiums through IRMAA surcharges, and shrink the value of certain tax breaks.
For most people, taking the first one in the year they turn 73 is the cleaner move.
There's one smart workaround worth knowing.
If you don't need the cash, you can direct your RMD straight to a qualified charity as a qualified charitable distribution.
It counts toward your required amount, but the money never shows up as taxable income.
You do need to be at least 70 and a half, and the transfer has to go directly from the custodian to the charity.
The biggest mistake financial planners see isn't a bad investment pick.
Brokerages and plan administrators often calculate the amount for you, but the responsibility for actually taking it sits with the account owner.
People who consolidate accounts, change jobs, or inherit an IRA frequently lose track of what's owed.
Set a calendar reminder for early December each year.
That gives you time to confirm the number, check whether you've satisfied it across every account, and make any charitable moves before the clock runs out.
The RMD rule isn't really about the IRS wanting your money early.
It's about collecting decades of deferred taxes at last.
Treat it as a scheduled bill rather than a surprise, and the sting is mostly administrative.
Final Thoughts
Ignore it, and the penalty does the talking for you.