Millions of Americans spend decades watching their 401(k) and IRA balances climb, then hit their mid-70s and discover the government wants a slice — whether they need the money or not.
Required minimum distributions, or RMDs, are mandatory withdrawals from most tax-deferred retirement accounts once you reach a certain age.
Miss one, and the penalty is steep enough to ruin a weekend.
The rules shifted under the SECURE 2.0 Act.
If you turned 72 after 2022, your RMDs now begin at 73.
Those born in 1960 or later wait until 75.
Roth IRAs are exempt entirely, which is why financial planners keep nudging younger workers toward them.
The IRS doesn't care whether you need the cash for groceries, rent, or nothing at all.
Once you hit your starting age, you must pull a minimum amount out every year based on your account balance and an IRS life expectancy table.
Skip it, and the penalty is 25% of the amount you should have withdrawn — dropping to 10% if you fix it quickly.
That withdrawal lands on your tax return as ordinary income.
For retirees already collecting Social Security, a large RMD can push more of those benefits into the taxable column.
It can also trigger higher Medicare Part B and Part D premiums two years later, thanks to income-related monthly adjustment amounts.
A single withdrawal can quietly raise costs across three separate parts of your budget.
The first RMD is due by April 1 of the year after you turn 73.
Every year after that, the deadline is December 31.
Take two distributions in that first year and you could double your taxable income in a single tax season — a trap that catches plenty of people who assume the April deadline is a free extension.
If you're still working and contributing to a 401(k) at your current employer, you may be able to delay RMDs from that specific plan until you actually retire.
That exception does not apply to IRAs or to old 401(k)s from former jobs, which is where a lot of people get surprised.
Qualified charitable distributions let you send up to $105,000 per year directly from an IRA to charity, and that money never touches your taxable income.
Converting part of a traditional IRA to a Roth in lower-income years shrinks future RMDs.
Withdrawing a bit more than required in years when your bracket is low can smooth the ride.
The worst move is ignoring the whole thing.
Custodians typically send reminders, but they don't calculate the amount for you in every case, and they don't file the paperwork.
If you've inherited an IRA, your rules are tighter and the deadlines are different — sometimes within 10 years of the original owner's death.
The retirement system rewards people who plan withdrawals as carefully as they planned contributions.
Treat the RMD calendar like a bill that shows up every year, because that's exactly what it is.
Final Thoughts
A few hours with a tax professional now can save thousands later.