Required minimum distributions are back in the spotlight, and not for a good reason.
Anyone who turned 73 last year or earlier has to pull a set amount of money out of traditional IRAs and most workplace retirement plans by December 31.
Miss it, and the penalty is 25% of the amount you should have withdrawn, dropping to 10% only if you fix it fast.
The rules shifted under the SECURE 2.0 Act, which pushed the starting age from 72 to 73 and eventually 75.
That means a chunk of retirees who planned around the old timeline now have an extra year of tax-deferred growth, but also fresh confusion about which year their first withdrawal is actually due.
The IRS calculates your RMD by dividing your account balance at the end of the prior year by a life expectancy factor from its Uniform Lifetime Table.
If your portfolio jumped in a strong market, your required withdrawal jumps with it, whether you need the cash or not.
You can delay your very first RMD until April 1 of the following year, but that means taking two distributions in the same tax year.
For anyone near a bracket edge, that double-up can push income into a higher rate and inflate the taxable portion of Social Security benefits.
There's one genuinely generous piece: qualified charitable distributions.
If you're 70½ or older, you can send up to $105,000 per year directly from an IRA to charity, and it counts toward your RMD while staying out of your taxable income.
For retirees who don't need the money, this is often the cleanest way to satisfy the requirement.
Roth IRAs have no lifetime RMDs for the original owner, but Roth 401(k)s historically did until recent law changes removed that for 2024 and beyond.
Still-working exceptions exist for some 401(k)s if you don't own more than 5% of the business, but they don't apply to IRAs.
The practical playbook is boring but effective.
Check your prior year-end balances, confirm your age and factor, and automate the withdrawal early in December so a paperwork glitch doesn't cost you a quarter of the money.
If you have multiple IRAs, the total can be taken from any one of them, but each 401(k) must be handled separately.
One more wrinkle: your brokerage may not calculate the RMD for you.
Some do, some don't, and the responsibility lands on you either way.
Set a calendar reminder and verify the number in writing.
Our take: the RMD deadline is one of the few retirement rules with a real penalty and zero grace period, yet it's treated like fine print.
Spend fifteen minutes this week confirming your number, then decide whether a charitable transfer or a Q4 withdrawal fits your tax picture better.
Final Thoughts
Waiting until late December rarely ends well.