If you turned 73 this year, the IRS has a message: it wants its cut of your retirement accounts.
Required minimum distributions, or RMDs, are the amounts you must withdraw annually from traditional IRAs and most workplace retirement plans once you hit a certain age.
Skip them, and the penalty is brutal—25% of the amount you should have taken out, though it drops to 10% if you fix the mistake quickly.
The rules changed in 2023 under the SECURE 2.0 Act.
The starting age moved from 72 to 73, and it climbs to 75 in 2033.
If you hit 72 in 2022 or earlier, you were already on the old schedule.
For everyone else turning 73 in 2024 or later, your first withdrawal deadline is April 1 of the year after you turn 73.
Here's where people get tripped up: that April 1 grace period only applies once.
Take your first RMD by April 1, and you'll still owe a second one by December 31 of that same year.
Two taxable withdrawals landing in one tax year can push you into a higher bracket and increase what you pay for Medicare premiums.
Many advisors suggest taking that first distribution in the year you turn 73 instead, spreading the tax hit.
The IRS divides your account balance by a life expectancy factor from its Uniform Lifetime Table.
At 73, that factor is 26.5—so a $500,000 balance means an RMD of about $18,868.
At 80, the factor drops to 20.2, pushing the required amount higher.
The older you get, the larger the percentage you must pull out.
A few practical moves can soften the blow.
If you're still working and own less than 5% of your employer, you may be able to delay RMDs from that specific 401(k) until you retire—but not from an IRA.
Roth IRAs have no RMDs during your lifetime, which is why some savers convert traditional balances to Roth in low-income years.
Qualified charitable distributions let those 70½ and older send up to $105,000 per year directly from an IRA to charity, satisfying the RMD without adding to taxable income.
Watch out for custodians that don't automatically calculate RMDs for every account.
If you hold multiple IRAs, you can take the total from one or a few—but each 401(k) must be handled separately.
Set a calendar reminder for early December, not late December, so a processing delay doesn't cost you.
The bottom line: RMDs are not optional, but the tax damage is manageable with a little planning.
If you're nearing 73, talk to a tax professional before the deadline sneaks up.
Final Thoughts
A few hours of homework now beats handing a quarter of your withdrawal to the IRS later.