If you turned 73 this year, the IRS expects a slice of your retirement account whether you need the money or not.
It's called a required minimum distribution, or RMD, and it's one of the few tax rules that punishes you for being too careful with your savings.
Once you hit your required beginning age, you must withdraw a minimum amount from traditional IRAs and most workplace plans each year.
Skip it, and the penalty is a 25% excise tax on the amount you should have taken — dropping to 10% if you correct the mistake within a specific window.
It was 70½ for years, then 72 under a 2019 law, and 73 for most people who hit that age starting in 2023.
Anyone born in 1960 or later may face 75.
If you're in that gray zone, checking your birth year before you plan anything is worth ten minutes of your time.
The IRS divides your account balance by a life expectancy factor from a uniform table.
At 73, that factor is about 26.5, so a $500,000 balance means roughly $18,900 must come out.
That number climbs each year as the factor shrinks, and it's recalculated every January using your prior year-end balance.
Where people get tripped up is in the details.
If you own multiple traditional IRAs, you calculate each one separately but can take the total from any combination of them.
Workplace 401(k)s don't get that flexibility — each plan stands alone.
And if you're still working past 73, your current employer's plan may be exempt, but that exception vanishes for IRAs.
You can delay your very first withdrawal until April 1 of the following year, but that means taking two distributions in the same calendar year.
For someone pushed into a higher bracket, that doubled-up income can trigger higher Medicare premiums two years later.
Most advisors suggest taking the first one on schedule to avoid the pileup.
The money doesn't have to sit in a checking account.
You can satisfy an RMD by donating up to $105,000 directly to charity through a qualified charitable distribution, which keeps the amount out of your taxable income entirely.
You can also reinvest the cash in a regular brokerage account if you don't need to spend it.
What you can't do is convert an RMD to a Roth.
The withdrawal has to come out first, and only what's left over is eligible for conversion.
One more thing worth knowing: the penalty for missing an RMD isn't automatic.
If you catch the error, file the right form, and explain the reason, the IRS has historically waived it.
But that's a request, not a right — and it's easier to just set a calendar reminder.
Our take: RMDs are less a tax trap than a nudge to actually use the money you spent decades saving.
Final Thoughts
If you're near the age threshold, a 20-minute call with a tax professional now beats a letter from the IRS later.