If you turned 73 this year, the IRS has a message: it's time to start pulling money out of 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 a certain age.
Miss one, and the penalty is steep — 25% of the amount you should have taken, though it drops to 10% if you fix it quickly.
The rule applies to traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred workplace plans.
Roth IRAs are exempt during the owner's lifetime, which is one reason they've become a favorite tool for retirees who want to leave money to heirs.
The starting age moved to 73 in 2023, and it's scheduled to rise to 75 in 2033.
The math isn't as simple as dividing your balance by your life expectancy.
The IRS publishes uniform lifetime tables, and your first withdrawal is based on your account balance at the end of the prior year divided by a factor tied to your age.
At 73, that factor is 26.5, so a $500,000 IRA would require roughly $18,900 that year.
The percentage climbs as you age — by your mid-80s, you're pulling out well over 6% annually.
One mistake that trips up new retirees: you can delay your very first RMD until April 1 of the following year, but that means taking two distributions in the same calendar year.
The double hit can push you into a higher tax bracket, raise your Medicare Part B and Part D premiums through income-related adjustments, and even affect how much of your Social Security is taxed.
There's a workaround worth knowing if you're still working.
The "still working" exception lets you skip RMDs from your current employer's 401(k) if you're not a 5% owner.
But it doesn't apply to IRAs or to old 401(k)s from previous jobs, so those still need withdrawals.
If you don't need the money, you have options beyond cashing the check.
A qualified charitable distribution lets you send up to $105,000 per year directly from an IRA to charity, and it counts toward your RMD while staying out of your taxable income.
Another move is a Roth conversion — take the distribution, pay the tax, and move it into a Roth where it can grow tax-free and won't face future RMDs.
Markets drop, and if you're forced to sell in a downturn, you lock in losses.
Some retirees satisfy their RMD early in the year, while others set up automatic monthly distributions to smooth out the swings.
Either way, mark the deadline: December 31 for every year after your first one.
If you hold multiple IRAs, you can calculate each one separately but take the total from any combination of them.
That flexibility doesn't extend to 401(k)s, which must each be satisfied individually.
Consolidating old accounts can cut the paperwork and the chance of missing one.
The bottom line: RMDs aren't optional, but the tax bill they create is negotiable.
Plan the withdrawal early, pair it with charitable giving or a Roth conversion when it makes sense, and check your bracket before December sneaks up.
Final Thoughts
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