If you've spent decades dutifully stuffing money into a 401(k) or traditional IRA, the government eventually wants its cut.
That moment arrives through something called a Required Minimum Distribution, or RMD.
It's the annual amount you must withdraw from most retirement accounts once you hit a certain age, and skipping it can trigger one of the harshest penalties in the tax code.
Here's the part that catches people off guard: you don't get to decide whether to take the money.
The IRS sets a deadline, calculates a minimum based on your account balance and life expectancy, and expects you to pull that cash out whether you need it or not.
Miss the deadline, and the penalty is a 25% excise tax on the amount you should have withdrawn.
That can be reduced to 10% if you fix the mistake quickly, but it's still real money vanishing for no good reason.
The age rules have shifted in recent years, which has added confusion.
Under current law, most retirees must start taking RMDs at age 73.
There's talk in Washington about pushing that to 75 down the road, but until a change is actually signed, planning around 73 is the safe move.
If you're already taking distributions, keep going—the rules didn't reset for you.
The math itself isn't mysterious once you see it.
The IRS publishes life expectancy tables, and you divide your account balance by a factor from that table.
A 73-year-old, for example, uses a factor of about 26.5, meaning roughly 3.8% of the account comes out that year.
As you age, the factor shrinks and the percentage you must withdraw grows.
By your mid-80s, you're pulling out well over 6% annually.
For your very first RMD, you can delay until April 1 of the following year.
If you delay, you'll take two distributions in the same calendar year, which can shove you into a higher tax bracket or inflate your Medicare premiums.
For every year after the first, the deadline is December 31—no extensions, no grace period.
RMDs from traditional accounts are taxed as ordinary income.
That money can also affect how much of your Social Security is taxable and can push you past income thresholds for Medicare surcharges.
Roth IRAs don't require withdrawals during your lifetime, which is one reason they've become a favorite tool for people trying to manage future tax bills.
A few practical moves can soften the blow.
If you're charitably inclined, a Qualified Charitable Distribution lets you send up to $105,000 per year directly from an IRA to a charity, and that amount counts toward your RMD while staying out of your taxable income.
If you're still working and own a 401(k) at that job, you may be able to postpone RMDs from that specific plan, though not from IRAs.
The biggest mistake is simply not knowing the rules exist.
Plenty of retirees have watched a chunk of their nest egg disappear to a penalty they never saw coming.
A quick conversation with a tax professional or a look at the IRS worksheets can prevent that.
The takeaway is simple: your retirement account was never entirely yours to ignore forever.
Treat the RMD deadline like any other bill on the calendar, because the IRS certainly will.
Final Thoughts
A little planning now beats handing over a quarter of a withdrawal later.