Required minimum distributions, or RMDs, are one of those retirement rules that sneak up on people.
If you've spent decades stuffing money into a traditional 401(k) or IRA, the IRS eventually wants its cut.
And that moment arrives sooner than many folks expect.
Once you hit a certain age, you must withdraw a minimum amount from most tax-deferred retirement accounts each year.
Miss it, and the penalty is steep — a 25% excise tax on the amount you should have taken, dropping to 10% if you fix it quickly.
That's real money vanishing for a paperwork slip.
Here's the part that catches people off guard: the age changed recently.
Under the SECURE 2.0 law, most people now start RMDs at 73, not 72 or 70½.
If you hit 73 in 2024 or later, that's your trigger year.
Roth IRAs are exempt — you never take RMDs from those.
But Roth 401(k)s now follow the same no-RMD rule, which is a quiet win for savers.
Your RMD is calculated by dividing your account balance at the end of the prior year by a life expectancy factor the IRS publishes.
As you age, that factor shrinks, so your required percentage grows.
A 75-year-old might need to pull roughly 4.4% of the balance.
If your accounts grew nicely, your withdrawal grows too — and so does the tax bill.
That's why retirees with big traditional balances feel the squeeze.
RMDs can push you into a higher tax bracket, increase what you pay for Medicare premiums, and even make more of your Social Security taxable.
None of that is a penalty for doing something wrong.
It's just how the tax code treats deferred income.
A few practical moves can soften the blow.
One option is a qualified charitable distribution, which lets you send up to $105,000 per year from an IRA directly to charity.
It counts toward your RMD but stays out of your taxable income.
If you already give to your church or a favorite nonprofit, this is often the cleanest strategy available.
Another approach is converting some traditional money to a Roth during your lower-income years before RMDs begin.
You pay tax now at a rate you control, and the Roth grows tax-free with no future withdrawal requirement.
It's not for everyone, and it takes planning with a tax professional, but it can shrink future RMDs meaningfully.
You can delay your very first RMD until April 1 of the following year, but that means taking two distributions in one calendar year — a double tax hit.
Most advisors suggest just taking the first one on schedule.
If you have multiple IRAs, you can calculate each RMD separately but take the total from any one account.
That flexibility doesn't apply to 401(k)s, which must each be satisfied individually.
The bottom line: RMDs aren't a crisis, but they reward people who plan ahead.
Check your age, know your account types, and talk to a tax pro before December, not after.
Final Thoughts
A little attention now can keep thousands of dollars working for you instead of disappearing into a higher tax bill.