If you turned 73 last year, the IRS has a message for you: it wants its cut of your retirement account, whether you need the money or not.
Required minimum distributions, or RMDs, force you to withdraw a minimum amount from traditional IRAs and 401(k)s each year once you hit that age.
Miss the deadline and the penalty is steep — 25% of what you should have taken, dropping to 10% if you fix it fast.
The deadline for your first RMD is April 1 of the year after you turn 73.
That sounds generous until you realize it means some retirees end up taking two withdrawals in the same calendar year — the delayed first one plus the current year's — and stacking that much income can push you into a higher tax bracket.
It can also inflate your Medicare Part B and Part D premiums two years later, because those are tied to income.
Every year after that first one, the deadline snaps back to December 31.
If the money doesn't leave the account by year-end, the penalty clock starts ticking.
The calculation itself isn't as scary as it sounds.
You take your account balance from December 31 of the prior year and divide it by a life expectancy factor the IRS publishes in its Uniform Lifetime Table.
At 73, that divisor is about 26.5, so a $500,000 IRA would require roughly $18,900.
At 80, the divisor drops to around 20.2, meaning a bigger percentage comes out.
The older you get, the larger the forced withdrawal — a detail plenty of people don't discover until it stings.
You can't satisfy an RMD by leaving it in the account, obviously, but you also can't roll it over.
If you're doing a Roth conversion, the RMD has to come out first, and it can't be part of the conversion.
And if you own multiple traditional IRAs, you can total the RMDs and take the whole amount from just one account — but 401(k)s don't get that luxury.
The one genuinely generous option: a qualified charitable distribution.
If you're 70½ or older, you can send up to $105,000 per year (the 2024 limit) straight from your IRA to a qualified charity.
It counts toward your RMD and never shows up as taxable income, which can help with both your tax bill and those Medicare surcharges.
For retirees who don't need the cash, this is often the cleanest move available.
Automatic RMD services are convenient, but they also keep assets parked with the same institution.
The rules exist to stop wealthy savers from sheltering money tax-free forever — a defensible goal, but the execution punishes ordinary retirees who simply forget a date.
My take: the RMD system is a paperwork minefield dressed up as a retirement rule, and the April 1 "grace period" is a trap that costs real people real money.
Final Thoughts
If you're anywhere near 73, set a calendar reminder, check your divisor, and talk to a tax professional before December, not after.