If you turned 73 this year, the IRS has a message for you: it's time to start withdrawing from your retirement accounts, whether you need the cash or not.
Required minimum distributions, or RMDs, are mandatory withdrawals from traditional IRAs and most 401(k)s once you hit that age.
Miss one, and the penalty is a 25% excise tax on the amount you should have taken — dropping to 10% if you fix it within a two-year window.
The rule catches plenty of retirees off guard.
After decades of being told to save, save, save, the script flips.
The government wants its tax revenue, and it wants it on a schedule.
The withdrawal amount is based on your account balance at the end of the prior year divided by a life expectancy factor the IRS publishes in tables.
At 73, that factor is about 26.5, meaning you'd withdraw roughly 3.8% of your balance.
The real pain isn't the withdrawal itself — it's the tax bill.
RMDs count as ordinary income, which can push you into a higher bracket, increase what you pay for Medicare Part B and Part D, and even trigger taxes on Social Security benefits.
For retirees who don't need the money, that's an unwelcome surprise.
There are a few legitimate ways to soften the blow.
One is the qualified charitable distribution, which lets you send up to $105,000 per year directly from an IRA to a qualified charity.
That amount counts toward your RMD but never shows up as income on your tax return.
If you already give to charity, this is often the single easiest move to make.
If you're still working and contributing to a 401(k) at your current employer, you may be able to delay RMDs from that specific plan until you actually retire.
Roth IRAs have no RMDs during the owner's lifetime, which is one reason conversions get more attractive as you approach 73.
Converting money in lower-income years can shrink the balance that future RMDs are calculated on.
Your very first RMD can be delayed until April 1 of the following year — but if you do that, you'll take two distributions in the same tax year, potentially pushing you into a higher bracket.
Most advisors suggest taking the first one on schedule to avoid the double-up.
A few practical reminders: RMDs apply per account for IRAs, but you can take the total from one or several.
For 401(k)s, each plan is calculated separately.
Set up automatic distributions with your custodian so you never miss a deadline.
And if you inherit an IRA from someone who died after 2019, different rules apply — most non-spouse beneficiaries now face a 10-year window.
The bottom line: RMDs are not optional, but the tax damage isn't fixed in stone.
A little planning in your late 60s — conversions, charitable distributions, withdrawal sequencing — can save thousands over a retirement.
Final Thoughts
The worst move is ignoring the letter from your custodian until December, when your options are gone.