If you turned 73 this year and have a traditional IRA or 401(k), the IRS is about to send you a bill—and it has nothing to do with income tax brackets you can plan around.
Required minimum distributions, or RMDs, are mandatory withdrawals the government forces retirees to take from tax-deferred accounts once they hit a certain age.
Miss one, and the penalty is steep: 25% of the amount you should have withdrawn, dropping to 10% if you fix it within a two-year window.
The rules got a shake-up under the SECURE 2.0 Act.
The starting age moved from 72 to 73 in 2023, and it climbs to 75 in 2033.
If you hit 72 in 2022 or earlier, you're already in the system.
Here's what catches people off guard: the IRS doesn't care whether you need the money.
You must pull a minimum amount each year based on your account balance and a life expectancy factor the agency publishes.
That withdrawal counts as ordinary income, which can push you into a higher tax bracket, trigger higher Medicare premiums, and even tax more of your Social Security benefits.
The math works against you in a specific way.
Your RMD is calculated by dividing your Dec. 31 account balance by a distribution period from the IRS Uniform Lifetime Table.
At 73, that divisor is 26.5, so a $500,000 balance means an $18,868 withdrawal.
At 80, the divisor drops to 20.2—your percentage creeps up every year, even if the market tanks.
If stocks fall 20% in a given year, your RMD is still based on the prior year-end balance.
You're forced to sell more shares at lower prices to meet the requirement, a sequence-of-returns trap that can permanently dent a portfolio.
Roth IRAs have no RMDs during the owner's lifetime.
If you're still working past 73 and don't own more than 5% of the company, your current employer's 401(k) can be skipped until you retire.
And a qualified charitable distribution lets you send up to $105,000 per year directly to charity, satisfying the RMD without adding to taxable income.
For married couples, the spousal-beneficiary rule can stretch things.
If your spouse is more than 10 years younger and is the sole beneficiary, you use a longer distribution period, shrinking each year's required amount.
Brokerages don't always auto-calculate RMDs across multiple accounts, and each IRA has its own requirement—though you can take the total from one or spread it across several.
A missed deadline means paperwork, penalties, and a call to your tax preparer you'd rather avoid.
One practical move: check whether your brokerage offers automatic RMD service, and set it for early December, not late December.
That gives you time to fix errors before the year closes. **Our take:** RMDs aren't a punishment, but they are a tax bill with a deadline attached.
The retirees who handle them best treat withdrawals as part of a multiyear tax plan—filling lower brackets on purpose, using charitable distributions, and converting to Roth accounts before age 73.
Final Thoughts
Waiting until the IRS notice arrives is the expensive way to learn the rules.