If you turned 73 this year, or you're getting close, the IRS has a message that arrives whether you need the money or not: take a slice out of your retirement account and pay income tax on it.
It's called a Required Minimum Distribution, or RMD.
It applies to most traditional IRAs, 401(k)s and similar workplace plans.
You generally must start withdrawals the year you hit 73, up from the old age of 72 under a change passed in 2022.
The penalty for skipping one is steep: 25% of the amount you should have withdrawn, dropping to 10% if you fix it promptly.
You don't get to choose a small token withdrawal.
The IRS publishes life expectancy tables, and your account balance gets divided by a factor based on your age.
At 73 that divisor is about 26.5, so a $500,000 IRA forces out roughly $18,900.
At 80, the divisor falls near 20.2, and the required slice grows as a percentage every year.
For retirees living on Social Security and a pension, that withdrawal can push them into a higher tax bracket, increase what they pay for Medicare Part B and Part D, and make more of their Social Security taxable.
The money isn't extra income in any practical sense.
It's income you already had, now triggering a bill.
The people who benefit most are the ones collecting the tax, plus the custodians and advisors who earn fees on assets they'd rather keep invested.
That's worth saying plainly, because a lot of RMD content is written by firms that manage the accounts.
If you're still working and your 401(k) is at your current employer, you may be able to delay RMDs from that specific plan until you retire, though IRAs don't get that break.
Roth IRAs have no RMDs during the owner's lifetime, which is a big reason conversions get pushed so hard.
You can also direct up to $108,000 per person in 2025 straight from an IRA to a qualified charity once you're 70½.
That's a Qualified Charitable Distribution, and it counts toward your RMD while staying off your taxable income.
If you already give to charity, this is arguably the single most useful move available.
For your first RMD, you can delay the withdrawal until April 1 of the following year.
Sounds generous, but it means taking two distributions in one calendar year, which can shove you into a higher bracket.
Most CPAs say just take the first one on schedule.
If you own multiple IRAs, you can total the RMDs and pull from any combination, but each 401(k) must be satisfied separately.
Move an account, forget to update beneficiaries, or let a custodian's automatic system lapse, and the penalty clock starts.
Our take: RMDs aren't a scam, but the coverage around them often is, because the loudest voices sell products that benefit from your confusion.
Know your divisor, know your bracket, and consider a one-time check with a fee-only advisor who isn't paid on your assets.
Final Thoughts
The IRS will get its cut either way, so you might as well decide how.