If you turned 73 last year and didn't touch your traditional IRA, the IRS has a message: it wants its cut, and the penalty for skipping is one of the harshest in the tax code.
Required minimum distributions, or RMDs, are the government's way of finally collecting taxes on retirement money you sheltered for decades.
Once you hit the trigger age, you must withdraw a minimum amount from traditional IRAs, 401(k)s, and most other tax-deferred accounts every single year, whether you need the cash or not.
Miss an RMD and the penalty is 25% of the amount you should have taken.
That drops to 10% if you fix it within a two-year correction window, but it's still a painful bite out of money you already earned.
The age threshold has shifted in recent years, which has tripped up plenty of retirees.
Under current law, anyone born in 1951 through 1959 hits RMDs at 73.
Those born in 1960 or later wait until 75.
If you were born before 1951, you were already in the system at 70½.
The withdrawal amount itself isn't a flat percentage.
The IRS divides your account balance by a life expectancy factor from its Uniform Lifetime Table.
At 73, that divisor is about 26.5, meaning you'd withdraw roughly 3.8% of your balance.
By your mid-80s, the divisor shrinks below 16, pushing your required percentage above 6%.
Here's the part that catches people off guard: the calculation uses your Dec. 31 balance from the prior year, not today's value.
If markets tanked since then, you're still on the hook for the bigger number.
Roth IRAs are exempt during the owner's lifetime, which is a major reason they've become a favorite estate-planning tool.
But Roth 401(k)s now follow the same no-RMD rule thanks to recent legislation, a change many workplace savers haven't noticed yet.
If you're still working past 73 and contributing to a 401(k) at that employer, you may be able to delay RMDs on that specific plan.
That exception doesn't apply to IRAs or to old 401(k)s from previous jobs.
Those still require withdrawals on schedule.
The simplest fix for most retirees is an automatic annual distribution set up through their brokerage.
It removes the guesswork and the risk of forgetting.
Just remember that taxes are due when the money comes out, so a large RMD can push you into a higher bracket or trigger higher Medicare premiums two years later.
One more deadline worth marking: you can delay your very first RMD until April 1 of the following year.
Sounds like a gift, but it means taking two taxable distributions in the same calendar year, which can shove you into a higher bracket.
Most tax pros suggest taking the first one on time instead.
If you've inherited an IRA from someone who wasn't your spouse, different rules apply, and the penalties for missing those distributions are just as steep.
The 10-year payout window has left many heirs scrambling to plan withdrawals they never expected. **The bottom line:** RMDs aren't optional and they're not going away.
Treat the deadline like a bill you can't ignore, set up automatic withdrawals, and talk to a tax professional before year-end, not after.
Final Thoughts
A little planning now beats handing Uncle Sam a quarter of what you forgot to take.