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 cash or not.
It's called a required minimum distribution, or RMD, and it applies to traditional IRAs, 401(k)s, and most other tax-deferred retirement plans.
The IRS charges 25% of the amount you should have withdrawn, dropping to 10% only if you fix the mistake within a specific correction window.
That's a harsh price for a deadline many retirees don't even know exists.
The rule kicks in at age 73 for most people, rising to 75 in 2033 under current law.
The government isn't being cruel for sport.
It spent decades letting you defer taxes on that money, and at some point it wants its cut.
An RMD is simply the IRS collecting on a bill you've been putting off. **How the math actually works** Your RMD is based on your account balance at the end of the previous year, divided by a life expectancy factor the IRS publishes in tables.
At 73, that factor is about 26.5, meaning roughly 3.8% of your balance must come out.
By your mid-80s, the percentage climbs past 6%.
The older you get, the larger the slice the government requires.
If your investments had a strong year, your RMD grows too, which can push you into a higher tax bracket even if your lifestyle hasn't changed.
Retirees with pensions, Social Security, and a healthy IRA can find themselves owing taxes at rates they never expected.
There's another wrinkle: IRMs don't count.
If you hold multiple traditional IRAs, you can take the total RMD from one account or split it across several.
But each 401(k) must be handled separately, so consolidating accounts before you hit 73 can spare you a paperwork headache. **Why this matters right now** Americans are retiring with more money in tax-deferred accounts than any generation before them, partly because workplace plans auto-enroll workers by default.
That's good news for savings, but it means more households will face RMDs — and more will be surprised by the tax bill.
Meanwhile, the Secure 2.0 law pushed the starting age later, which sounds generous but actually gives accounts more time to grow, potentially making future RMDs larger.
Delaying the deadline doesn't shrink the obligation; it inflates it.
The practical move is planning withdrawals before the IRS forces your hand.
Filling lower tax brackets with voluntary withdrawals in your 60s, converting some money to a Roth, or timing charitable donations through a qualified charitable distribution can all soften the blow.
A qualified charitable distribution lets you send up to $108,000 directly from an IRA to charity in 2025, and it counts toward your RMD. **The takeaway** An RMD isn't a penalty or a mistake.
It's the back half of a deal you made decades ago when you chose to skip taxes on the way in.
The retirees who handle it well aren't the ones with the biggest accounts — they're the ones who mapped out the withdrawal years before the letter arrived.
Check your balance each December, confirm your deadline, and talk to a tax professional if the numbers get complicated.
Final Thoughts
The 25% penalty is entirely avoidable, and that's the only part of this story you truly control.