Millions of Americans spend decades building a nest egg, then hit a birthday that quietly flips the script.
Once you turn 73, the IRS stops letting that money sit untouched.
You are now required to withdraw a set amount every year from most tax-deferred accounts — whether you need the cash or not.
That rule is called a required minimum distribution, or RMD.
It applies to traditional IRAs, 401(k)s, 403(b)s, and most other workplace plans.
Roth IRAs are the big exception: original owners never face RMDs during their lifetime.
If you inherited a Roth, different rules may apply to you.
Here is the part that catches people off guard.
The penalty for missing an RMD was once a brutal 50% of the shortfall.
The SECURE 2.0 Act cut that to 25%, and it drops to 10% if you fix the mistake quickly.
Still, that is real money leaving your account for no reason other than a missed deadline.
Your first RMD deadline works differently from every one after it.
For the year you turn 73, you can delay that withdrawal until April 1 of the following year.
Sounds generous, until you realize taking two taxable withdrawals in one calendar year can push you into a higher bracket and inflate your Medicare premiums.
The math itself is simpler than most people fear.
The IRS publishes life expectancy tables, and you divide your account balance by a factor based on your age.
A $500,000 balance means roughly $18,868 must come out that year.
By 80, the factor falls to 20.2, so the required slice gets bigger even if the balance stays flat.
As you age, RMDs claim a larger percentage of your nest egg, and if markets drop at the same time, you are selling more shares into weakness.
Retirees who do not need the income often reinvest it in a taxable brokerage account, but they still owe income tax on the withdrawal.
Qualified charitable distributions let you send up to $108,000 per year directly from an IRA to charity, and that amount counts toward your RMD while staying out of your taxable income.
Converting some traditional IRA money to a Roth in low-income years can shrink future RMDs, though you pay tax on the conversion.
If you are still working past 73 and own a 401(k) at that employer, you may be able to skip RMDs on that specific plan.
That exception does not cover IRAs or old employer plans.
Check the fine print before assuming you qualify.
The practical takeaway: mark your birthday on the calendar and call your custodian.
Most brokerages will calculate your RMD for you and can set up automatic distributions, which is far safer than trusting memory.
Confirm the deadline in writing, keep records, and review the plan each January.
It is basic housekeeping that protects money you already earned.
The real problem is not the tax bill — it is the surprise.
RMDs are knowable years in advance, yet plenty of retirees learn about them the spring after they were due.
Final Thoughts
Spend twenty minutes with your statements this year, and you will never be that person.