For millions of Americans, retirement accounts have been a set-it-and-forget-it project for decades.
You contribute, the market does its thing, and the balance grows.
Then a birthday arrives, and the IRS shows up with its hand out.
That moment is tied to required minimum distributions, or RMDs.
Once you hit a certain age, the government no longer lets your tax-deferred accounts sit untouched.
It forces you to withdraw a minimum amount each year — and then taxes that money as ordinary income.
The starting age has shifted in recent years.
Under current rules, most people must begin RMDs at 73, up from the old 70½ threshold.
Those who reach 75 in the coming years get a later start.
The change gave savers a few extra years of tax-deferred growth, but it also created confusion about which birthday actually triggers the first withdrawal.
Here is why this matters for your household budget.
The penalty for missing an RMD is one of the steepest in the tax code: 25% of the amount you should have taken but didn't.
That drops to 10% if you correct the mistake promptly.
There is no partial credit for good intentions.
The math behind your RMD is less mysterious than it sounds.
The IRS publishes life expectancy tables, and you divide your account balance by a factor tied to your age.
At 73, that factor is roughly 26.5, meaning you'd withdraw about 3.8% of the balance.
By your mid-80s, the percentage climbs past 6%, and it keeps rising.
That rising percentage creates a quiet squeeze.
The older you get, the larger the share of your account the government requires you to pull out and pay taxes on.
For retirees who don't need the cash, this can push them into a higher bracket, increase Medicare premium surcharges, and reduce the value of other tax breaks.
Your first RMD can be delayed until April 1 of the following year, which sounds like a gift.
But that means taking two distributions in the same calendar year — potentially stacking income and triggering a bigger tax bill.
Financial planners often suggest taking the first one on schedule to avoid the pileup.
Accounts affected include traditional IRAs, 401(k)s, 403(b)s, and most other workplace plans.
Roth IRAs are exempt, which is part of why they've become a favorite tool for estate planning.
Roth 401(k)s used to be subject to RMDs, but that requirement disappeared starting in 2024.
If you're still working and own less than 5% of your employer, you may be able to delay RMDs on that specific 401(k) until you retire.
It's also worth noting that each IRA's RMD must be calculated separately, though you can combine withdrawals across accounts to satisfy the total.
The simplest defense is a calendar reminder and a call to your custodian.
Most brokerages will calculate the amount for you and can set up automatic distributions.
For anyone managing multiple accounts or a large balance, a tax professional can map out a multiyear strategy — sometimes converting portions to Roth accounts before RMDs kick in. **Our take:** RMDs aren't a punishment, but they are a deadline most retirees underestimate until the first penalty letter arrives.
Treat the age trigger like any other financial milestone and plan a year ahead, not a month.
Final Thoughts
A little paperwork now beats handing the IRS a quarter of what you forgot to withdraw.