If you turned 73 this year, the IRS has a message: start withdrawing from your retirement accounts, whether you need the money or not.
Required minimum distributions, or RMDs, are mandatory withdrawals from traditional IRAs and most 401(k)s once you hit a certain age.
Miss one, and the penalty is 25% of the amount you should have taken — dropping to 10% if you fix it quickly.
The rule sounds simple, but the second-order effects are tripping up retirees who already feel squeezed by grocery bills and rent hikes.
In 2025, the age to begin RMDs is 73 for most people, rising to 75 in 2033.
The amount you must withdraw is based on your account balance at the end of the prior year divided by an IRS life expectancy factor.
When markets are up, that balance — and your taxable withdrawal — gets bigger.
The IRS doesn't care whether you need the cash for groceries, prescriptions, or nothing at all.
The distribution hits your taxable income for the year.
That can push you into a higher marginal bracket, increase the taxable portion of your Social Security benefits, and raise your Medicare Part B and Part D premiums two years later through income-related monthly adjustment amounts.
Retirees who saved diligently in tax-deferred accounts are discovering that a modest lifestyle doesn't protect them.
A $600,000 IRA at age 73 produces a required withdrawal of roughly $24,500 in year one, depending on the exact factor.
Add a small pension and Social Security, and suddenly a single filer can cross into a bracket they never expected to see in retirement.
The mechanics matter more than ever because everyday costs aren't cooperating.
Grocery prices remain well above 2019 levels, rent has climbed in most metros, and credit card APRs are hovering near record highs.
For retirees carrying balances, a forced taxable withdrawal that isn't needed for spending often goes straight into a savings account — while the tax bill comes due in April.
There are a few legitimate ways to soften the blow.
Qualified charitable distributions let you send up to $108,000 per year from an IRA directly to charity, and that amount counts toward your RMD without adding to taxable income.
Roth conversions before RMD age can reduce future required amounts, though they trigger taxes now.
And if you're still working past 73, a workplace 401(k) at a non-owning employer may allow you to delay RMDs on that specific account.
The first is forgetting that each IRA has its own RMD, even though you can take the total from one or more IRAs.
The second is missing the deadline — generally December 31, with a one-time option to delay your very first RMD until April 1 of the following year.
That delay can stack two taxable distributions into a single tax year.
If you inherited an IRA from someone who died in 2020 or later, different rules apply, and most non-spouse beneficiaries must empty the account within 10 years.
Those annual withdrawals can collide with your own RMDs and spike your income.
The practical move is to check your account balances in January, not December.
Ask your custodian to calculate the required amount automatically, and review whether a charitable distribution or a partial Roth conversion makes sense for your bracket.
A few hours of planning can keep more of the money you spent decades accumulating.
Our take: RMDs aren't a punishment, but they are a tax bill on a schedule you don't control.
Treat the withdrawal as a planning event, not an afterthought, and the damage stays manageable.
Final Thoughts
Ignore it, and the penalty plus the bracket creep can cost far more than the distribution itself.