If you turned 73 this year, the IRS has a birthday present for you: a mandatory withdrawal from your retirement accounts, whether you need the money or not.
And because balances mostly climbed in 2024, the required minimum distribution is likely larger than the one you calculated a year ago.
RMDs are based on your account balance at the end of the prior year divided by an IRS life expectancy factor.
A retirement account that grew 10% means your forced withdrawal grows roughly 10% too — even if your grocery bill only rose 2.5%.
The IRS doesn't care that your budget didn't inflate at the same rate.
The rule kicks in for traditional IRAs, 401(k)s, and most other tax-deferred accounts.
Roth IRAs are exempt for the original owner.
Miss the deadline and the penalty is 25% of the amount you should have taken, dropping to 10% if you fix it quickly.
That's not a slap on the wrist — on a $20,000 missed distribution, we're talking $2,000 to $5,000 gone.
Where this gets genuinely messy is the paperwork.
If you own multiple IRAs, you can total the RMDs and pull the whole amount from one account.
But 401(k)s can't be pooled that way — each plan's distribution has to come out of that plan.
Plenty of retirees learn this the expensive way, after their advisor asks why three separate checks showed up.
The age moved to 73 in 2023 under SECURE 2.0, and it's scheduled to hit 75 in 2033.
People who hit 72 in 2022 got a reprieve.
People turning 73 in 2025 are fully in the system.
If you're a decade out, plan for a later start but don't count on Congress leaving the rules alone.
The cynical read: this isn't really a retirement rule, it's a tax collection mechanism.
The government deferred your taxes for decades and now wants its cut.
Every year you delay or under-withdraw is a year of interest-free lending to the Treasury.
The "required" in required minimum distribution is doing a lot of work.
First, check your year-end 2024 statements and run the numbers now, not in December.
Second, consider qualified charitable distributions if you give to charity — they can satisfy the RMD and keep the amount out of taxable income.
Third, if you don't need the cash, a Roth conversion or reinvesting in a taxable account can blunt the tax hit.
Talk to a tax professional before doing any of it, because the rules interact in ways that punish improvisation.
Our take: RMDs are one of the few retirement rules that hit savers hardest precisely because they saved well.
A bigger balance means a bigger forced withdrawal means a bigger tax bill, often right when you're trying to keep income low for Medicare premium purposes.
Final Thoughts
The system rewards careful planning and punishes autopilot — and the people selling annuities and "RMD solutions" know exactly which buttons to push.