If you turned 73 last year, the tax man has a message for you: it's time to start withdrawing from that retirement account, whether you need the money or not.
Required minimum distributions, or RMDs, are the government's way of finally collecting taxes on decades of pre-tax contributions.
Miss the deadline, and the penalty is brutal—25% of the amount you should have taken, though it drops to 10% if you fix it quickly.
The Secure 2.0 law pushed the starting age to 73 for most people, but if you hit 72 back in 2022, you were caught in a confusing transition year.
Some retirees got contradictory guidance from their custodians and took distributions early, only to learn they didn't have to.
Others waited and now face a scramble before the December 31 deadline.
The math catches plenty of people off guard.
Your RMD is calculated by dividing your account balance from the prior December 31 by a life expectancy factor the IRS publishes each year.
At 73, that factor is about 26.5, meaning roughly 3.8% of your balance has to come out.
On a $500,000 IRA, that's around $18,900 hitting your taxable income—enough to bump some retirees into a higher bracket or trigger higher Medicare premiums two years down the road.
The Medicare connection is the part almost nobody warns you about.
Those Part B and Part D surcharges, known as IRMAA, are based on income from two years prior.
A large RMD can push you over a threshold and cost you hundreds of extra dollars a month.
Financial planners say the fix is to plan withdrawals earlier, do Roth conversions in low-income years, or use qualified charitable distributions once you're 70½.
There's one piece of good news: the penalty for missing an RMD was cut from 50% to 25% under Secure 2.0, and to 10% if you catch the mistake and file a corrected return within two years.
Still, that's real money vanishing for a paperwork slip.
If you hold multiple IRAs, you can take the total from one account, but 401(k) RMDs must be calculated and withdrawn separately for each plan.
Watch out for scams riding this deadline too.
Fraudsters are calling retirees claiming to be "IRS RMD specialists" who need bank details to process a withdrawal.
The IRS does not call, text, or email demanding immediate payment or account access.
Hang up and verify through your actual custodian.
If you're unsure whether you've satisfied this year's requirement, check your account statements or call your plan administrator directly.
Setting up an automatic distribution can prevent the whole headache next year.
And if your situation is complicated—multiple accounts, a deceased spouse's IRA, or a big charitable goal—a one-time consultation with a tax professional often costs less than the penalty for getting it wrong.
The takeaway is simple: this deadline doesn't care whether you need the cash.
Ignoring it doesn't make it go away—it just makes it more expensive.
Final Thoughts
A little planning now beats a letter from the IRS later.