If you turned 73 this year, the IRS has a message that a surprising number of retirees miss every single year: you owe a withdrawal from your retirement accounts, and the penalty for skipping it is steep.
It's called a required minimum distribution, or RMD.
Once you hit a certain age, the government stops letting your tax-deferred nest egg sit untouched forever.
You have to pull money out each year and pay income tax on it.
The rule applies to traditional IRAs, 401(k)s, and most other workplace plans.
Anyone born between 1951 and 1959 now starts at 73, while those born in 1960 or later wait until 75.
If you hit the old magic number of 70½ before 2020, your start date already came and went.
The IRS divides your account balance by a life expectancy factor, and that number shrinks as you age — meaning your required withdrawal grows every year.
Miss the deadline and you owe a 25% excise tax on the amount you should have taken out.
That penalty can drop to 10% if you catch the mistake and fix it quickly.
The first-year deadline trips up more people than any other.
For your very first RMD, you're allowed to delay the withdrawal until April 1 of the following year.
Sounds generous, but it's a trap: take that delay and you'll stack two taxable withdrawals into the same calendar year, potentially shoving you into a higher bracket and boosting your Medicare premiums.
Most financial planners say it's cleaner to take the first one on schedule.
After year one, every deadline is December 31.
There's one more mistake that costs retirees real money: forgetting accounts.
Each IRA has its own RMD, though you can pool withdrawals across multiple IRAs and take the total from just one.
But 401(k)s don't get that flexibility — each plan stands alone.
Own two old 401(k)s from two former employers and you owe a separate withdrawal from each one.
If you're still working and contributing to a 401(k) at your current job, you may be able to skip the RMD on that specific plan, but only if you don't own more than 5% of the business.
That exception vanished at the start of 2024 for Roth accounts in employer plans, which no longer require withdrawals at all.
For retirees who don't need the cash, there's a smarter move than writing a check to the IRS: a qualified charitable distribution.
You can send up to $108,000 per year directly from your IRA to a charity, and that money never touches your taxable income.
It can satisfy part or all of your RMD while keeping your adjusted gross income lower — which matters if you're trying to avoid the Medicare surcharge.
The takeaway is simple: know your age, know your deadline, and count every account.
The IRS won't send a reminder, but it will send a bill.
Set a calendar alert for early December each year, or ask your plan administrator whether they can automate the withdrawal.
Final Thoughts
A five-minute check beats a 25% penalty every time.