If you turned 73 this year, the IRS has a message: it wants a slice of your retirement account, whether you need the money or not.
It's called a required minimum distribution, or RMD.
Starting at age 73, the government forces you to withdraw a minimum amount each year from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts.
Miss it and the penalty is brutal — a 25% excise tax on the amount you should have taken, dropping to 10% if you correct it fast enough.
The catch is that RMDs don't care about your plans.
You could be happily working, debt-free, and nowhere near needing that money.
The withdrawal still happens, and it's taxed as ordinary income.
The deadline for your first RMD is April 1 of the year after you turn 73 — which sounds generous until you realize that taking two distributions in one year can push you into a higher tax bracket and, for some, trigger higher Medicare premiums.
After that first year, every RMD is due by December 31.
The RMD amount is based on your account balance at the end of the prior year and a life expectancy factor the IRS publishes.
Custodians like Fidelity and Vanguard calculate it for you, but the responsibility is yours.
Failing to act because you assumed your broker would handle it is one of the most common and expensive mistakes.
There's also a wrinkle for people with multiple IRAs.
You can total your RMDs across all traditional IRAs and take the money from whichever one you like.
But 401(k)s don't get that flexibility — each one must be calculated and paid separately.
And if your spouse is more than 10 years younger, different tables apply.
So do special rules for inherited accounts, which changed under the SECURE Act and still confuse plenty of heirs.
The savvy move isn't to dodge the RMD — you can't — but to plan around it.
Some retirees use qualified charitable distributions to send up to $105,000 per year directly to charity, which satisfies the RMD without adding to taxable income.
Others do Roth conversions in their early retirement years, before RMDs start, to shrink the balance that will eventually be forced out.
A retiree who wakes up in December to learn they owe taxes on $40,000 they didn't want or spend is a retiree who didn't do the math in January.
Our take: RMDs aren't a scam, but they're a reminder that the taxman always gets his cut eventually.
Final Thoughts
The people who benefit most are the ones who treat the rule as a planning deadline, not a surprise — because the penalty for ignorance here is one of the few the IRS still enforces with real teeth.