If you turned 73 this year, the IRS has a message that arrives whether you need the money or not.
Required minimum distributions, or RMDs, force retirees to pull a set amount out of traditional 401(k)s and IRAs annually, and that withdrawal lands on your tax return as ordinary income.
The rule exists because these accounts grew tax-deferred for decades.
The government eventually wants its cut, so once you hit the age threshold, you can no longer let the balance sit untouched.
Miss the deadline and the penalty is steep: a 25% excise tax on the amount you should have withdrawn, dropping to 10% if you fix it quickly.
The age for starting RMDs moved to 73 under the SECURE 2.0 Act, and it climbs to 75 in 2033.
If you are still working and own a 401(k) at your current employer, you may qualify for a delay, but that exception does not cover IRAs or old workplace plans.
The math is not something you can eyeball.
The IRS publishes life expectancy tables, and your withdrawal is roughly your Dec. 31 balance divided by a factor tied to your age.
At 73, that factor is about 26.5, so a $500,000 account requires roughly $18,900 out the door.
By your mid-80s, the divisor shrinks near 16, pushing the required percentage much higher.
That timing matters in a year like this one.
With grocery bills, rent, and insurance still running hot, retirees often find the forced withdrawal arrives at the worst moment.
Take it in a down market and you lock in losses.
Skip it and the penalty does real damage.
There is also a stealth trap that catches many households.
A larger RMD can push your income past thresholds that determine how much of your Social Security benefit is taxed, and it can raise your Medicare Part B and Part D premiums two years later through income-related monthly adjustment amounts.
Two retirees in similar financial shape can owe very different amounts simply because one has a bigger IRA.
A few practical moves can soften the blow.
A qualified charitable distribution lets you send up to $105,000 per year directly from an IRA to charity, and that amount counts toward your RMD without adding to taxable income.
Converting part of a traditional account to a Roth in a low-income year shrinks future RMDs, though it triggers tax now.
And if you have several IRAs, you can take the total from one account rather than writing checks from each.
The first-year deadline trips up plenty of people.
You must take your initial RMD by April 1 of the year after you turn 73, but every year after that is due by Dec. 31.
Double up in that first year and you may push yourself into a higher bracket.
The takeaway is simple: the IRS does not care whether you need the cash.
If your account balance is growing and your first RMD is approaching, talk to a tax professional before December, not after.
Final Thoughts
A little planning in October beats a penalty letter in April.