If you turned 73 this year, the IRS has a message: it wants its cut of your retirement account.
Required minimum distributions, or RMDs, force savers to pull money out of traditional IRAs and 401(k)s annually once they hit a certain age.
Miss the deadline and the penalty can sting.
The rule isn't new, but it catches people off guard every year.
Many retirees spent decades hearing "don't touch your retirement savings." Then the government flips the script and says you must.
The money comes out whether you need it or not, and it lands on your tax return as ordinary income.
The current starting age is 73 for most people, thanks to the SECURE 2.0 Act.
That's up from 70½, a change that gave some savers a few extra years of tax deferral.
But the deadline sneaks up: you generally must take your first RMD by April 1 of the year after you turn 73, then by December 31 every year after.
Skip it, and the IRS can hit you with a 25% excise tax on the amount you should have withdrawn, reduced to 10% if you fix it quickly.
The amount you must withdraw isn't a flat number.
It's based on your account balance at the end of the prior year, divided by a life expectancy factor the IRS publishes in tables.
The older you get, the higher the percentage you're forced to pull.
By your 80s, it can climb into double digits.
Why should anyone care if they don't have a huge nest egg?
Because RMDs affect taxes, Medicare premiums, and Social Security taxation.
A forced withdrawal can push your income over thresholds that trigger higher Medicare Part B and Part D surcharges, known as IRMAA.
So a distribution you didn't even want can cost you in multiple ways.
And this is where the financial industry's incentives deserve scrutiny.
Brokerages and fund companies love RMDs because they generate transactions, and sometimes fees.
Advisors may suggest rolling assets into products that delay or reshape the tax hit, but not every strategy benefits you as much as it benefits the person selling it.
First, check your age and deadline now, not in December.
Second, if you have multiple IRAs, you can usually take the total RMD from one or any combination, but 401(k)s each have their own rules.
Third, consider a qualified charitable distribution, which lets you send up to $105,000 (indexed) directly to charity and count it toward your RMD.
That can satisfy the requirement without adding to your taxable income.
Also worth knowing: Roth IRAs have no RMDs during the owner's lifetime.
That's one reason Roth conversions get so much attention.
But converting a traditional IRA to a Roth triggers taxes upfront, and it only pays off if your tax rate now is lower than it will be later.
If you're still working past 73 and own less than 5% of the company, you may be able to delay RMDs from your current employer's 401(k).
The bigger picture: RMDs exist because the government gave you a tax break on the way in, and it wants the money back on the way out.
You can plan around them, but you can't ignore them.
My take: RMD rules are one more reminder that retirement money was never fully yours in the tax code's eyes.
The people who do best are the ones who map out withdrawals years ahead, not the ones who panic in April.
Final Thoughts
Talk to a tax professional about your specific situation before making moves.