If you turned 73 this year, the IRS has a message that lands like a January credit card statement: it's time to start pulling money out of your tax-deferred retirement accounts, whether you need the cash or not.
These withdrawals are called required minimum distributions, and they apply to traditional IRAs, 401(k)s, and most other employer-sponsored plans.
The logic is simple — you deferred taxes on that money for decades, and now Washington wants its cut.
Miss the deadline or miscalculate the amount, and the penalty is a 25% excise tax on the shortfall, dropping to 10% if you fix it quickly.
The math catches more people off guard than the deadline.
Your RMD is calculated by dividing your account balance at the end of the prior year by a life expectancy factor from IRS tables.
At 73, that factor is 26.5, meaning roughly 3.8% of your balance must come out.
By 90, you're looking at nearly 9% annually — a forced sell-off that can hit hardest during market downturns.
Here's the part that stings: the custodian of your account — Fidelity, Vanguard, Schwab, whoever holds it — will usually calculate the RMD for you and even offer to withhold taxes.
But the ultimate responsibility for taking the right amount on time sits with you.
If you own multiple IRAs, you can total the RMDs and withdraw from just one, but 401(k) accounts must each be satisfied separately.
That distinction trips up plenty of retirees who rolled old workplace plans into new ones.
You must take your first RMD by April 1 of the year after you turn 73 — but if you delay, you'll owe two distributions in the same calendar year, which can push you into a higher tax bracket and inflate your Medicare Part B and Part D premiums two years later through income-related monthly adjustment amounts.
For higher-income retirees, the pain doesn't stop at income tax.
RMDs count toward modified adjusted gross income, which determines how much of your Social Security benefit gets taxed and whether you owe the 3.8% net investment income tax.
There's one widely used workaround: qualified charitable distributions.
Once you're 70½, you can send up to $105,000 per year directly from an IRA to a qualified charity, and that amount counts toward your RMD while staying out of your taxable income.
For retirees who don't need the money, it's often the cleanest lever available.
Another option is a qualified longevity annuity contract, which lets you move a portion of your balance into a deferred income stream that's excluded from RMD calculations until payments begin.
Roth IRAs, notably, have no RMDs during the owner's lifetime — one reason conversions have grown more popular.
The takeaway for anyone in their 60s: this isn't a problem you solve in April.
It's a decade-long tax planning exercise, and the moves you make in your late 50s and early 60s — partial Roth conversions, charitable strategies, account sequencing — determine how much of your nest egg actually reaches your bank account. **Our take:** RMDs aren't a punishment, but they're a tax bill with a deadline, and the IRS doesn't offer payment plans.
Treat the year you turn 72 as a planning checkpoint, not the year you turn 73 as a scramble.
Final Thoughts
A few hours with a fee-only advisor or tax professional now can easily save five figures later.