If you turned 73 this year, or you're getting close, there's a deadline lurking on your calendar that most people don't think about until December.
It's called a required minimum distribution, or RMD, and it forces you to pull money out of most retirement accounts whether you need the cash or not.
The rule applies to traditional IRAs, 401(k)s, and similar tax-deferred accounts.
Once you hit your required beginning date, you generally must withdraw a minimum amount each year.
Skip it, and the penalty is steep: 25% of the amount you should have taken, dropping to 10% if you fix it quickly.
Here's the math that catches people off guard.
The IRS divides your account balance by a life expectancy factor.
At 73, that factor is about 26.5, so a $500,000 balance means an RMD near $18,900.
That entire withdrawal gets added to your taxable income for the year.
That matters more than ever in 2024 and 2025.
With the standard deduction for married couples filing jointly sitting at $29,200 for 2024, a large RMD can push you into a higher bracket, increase the taxable portion of your Social Security, and raise your Medicare Part B and D premiums through income-related monthly adjustment amounts.
The 2023 change that raised the starting age from 72 to 73 gave some savers an extra year, but it also created confusion.
If you were born in 1959, your start age is 73.
If you were born in 1960 or later, it's 75.
People born before 1959 already had their start age set at 72 or 73 depending on birth year, so double-check before you assume anything.
Roth IRAs don't require withdrawals during the owner's lifetime, which is one reason conversions get so much attention.
Roth 401(k)s used to require them, but that rule disappeared starting in 2024.
If you're still working and don't own more than 5% of the business, your current employer's 401(k) may let you delay until you actually retire.
A few practical moves can soften the blow.
Qualified charitable distributions let you send up to $105,000 per year directly from an IRA to charity starting in 2024, and those dollars count toward your RMD without landing in your taxable income.
Timing also matters: taking your first RMD in the year you turn 73 rather than waiting until April 1 of the following year avoids stacking two distributions into one tax year.
For anyone with a large traditional balance, the bigger play is planning years ahead.
Partial Roth conversions during low-income years, before Social Security and RMDs kick in, can shrink future required withdrawals and the taxes they trigger.
That window closes fast once the RMDs begin.
Watch for the details that trip people up.
Each IRA has its own RMD, but you can take the total from one or any combination.
Automatic withdrawal setups through your brokerage can handle the deadline for you, but verify the amount each year because balances and factors change.
The takeaway here is simple: an RMD is not optional income, it's forced income, and the tax code treats it that way.
Final Thoughts
A 20-minute check with a tax professional or a free IRS worksheet today can save you thousands later.