Every January, millions of Americans over 73 get the same nagging reminder from their brokerage: it's time to take your required minimum distribution.
And every year, a chunk of them ignore it, forget it, or assume the IRS will go easy on them.
Miss the deadline and the penalty is 25% of the amount you should have withdrawn.
On a $20,000 RMD, that's a $5,000 hit — for money that was already yours.
The good news buried in the tax code is that this penalty shrank recently.
Congress cut it to 25%, and if you catch the mistake and fix it quickly, it drops to 10%.
That correction window matters more than most people realize.
If you hold a traditional IRA, a 401(k), a 403(b), or most other tax-deferred retirement accounts, the IRS eventually forces you to start pulling money out and paying income tax on it.
The starting age is now 73 for most people, rising to 75 in 2033.
Roth IRAs are the big exception — those never require a withdrawal during your lifetime.
Your first RMD is due by April 1 of the year *after* you turn 73, which sounds generous.
But here's the catch: if you delay that first one into the next calendar year, you'll owe two distributions in the same tax year.
That can shove you into a higher bracket and even trigger higher Medicare premiums two years later.
After that first year, every RMD is due by Dec. 31.
If the market tanks in December and you're scrambling to sell, that's the IRS's problem, not yours to negotiate.
The amount itself is based on your account balance at the end of the prior year divided by a life-expectancy factor the IRS publishes.
Most brokers calculate it for you automatically, which is why the people who get burned are often those with multiple accounts — a 401(k) from an old job here, an IRA at a different custodian there.
You can't just take the total from one place unless they're the same type of IRA.
If you're still working past 73, there's a partial escape hatch: you may be able to skip RMDs from your *current* employer's 401(k), but only if you don't own more than 5% of the business.
A few practical moves can keep you out of trouble.
Set up automatic distributions so you never have to remember.
Consider a qualified charitable distribution, which lets you send up to $105,000 (indexed) directly to charity and count it toward your RMD — a rare way to satisfy the requirement without adding to your taxable income.
And if you've already missed one, file Form 5329 and request a waiver; the IRS grants them routinely when you pay the tax promptly.
The bottom line: this isn't a rule designed to trip you up, but it will absolutely punish a busy year and a forgotten deadline.
Final Thoughts
Automate it, check every account, and treat that December date like it's carved in stone.