Required minimum distributions are the government's way of finally collecting taxes on retirement accounts it has let grow untaxed for decades.
Once you hit a certain age, you can't leave that money parked forever.
You have to start pulling it out, whether you need the cash or not.
For most retirees today, that trigger age is 73.
Miss the deadline and the penalty is brutal: 25% of the amount you should have withdrawn, dropping to 10% if you fix it quickly.
On a $20,000 missed withdrawal, that's a $2,000 to $5,000 hit to your own savings.
The rule applies to traditional IRAs, 401(k)s, 403(b)s, and most other workplace plans.
Roth IRAs are the big exception, since you already paid taxes on that money.
If you're still working and own less than 5% of your employer, you can often delay withdrawals from that specific 401(k) until you retire.
The deadline matters as much as the amount.
You generally must take your first distribution by April 1 of the year after you turn 73.
That sounds generous, but it creates a trap: if you delay that first one to early next year, you'll owe two distributions in the same calendar year.
That can push you into a higher tax bracket, spike your Medicare premiums, and even trigger extra taxes on Social Security benefits.
Every year after that first one, the deadline is December 31.
If you have multiple IRAs, you can calculate each one separately but take the total from any combination of them.
Workplace plans like 401(k)s don't get that flexibility.
The IRS publishes life expectancy tables, and you divide your account balance by a factor based on your age.
At 73, that factor is about 26.5, so a $500,000 balance means roughly $18,900 comes out.
By your mid-80s, the factor shrinks and the required percentage climbs sharply.
A common mistake is taking the distribution but forgetting the tax bill.
Nothing is withheld automatically from an IRA distribution unless you ask.
Retirees who spend the full amount and then get a surprise tax notice in April are the rule, not the exception.
One smart move for people who don't need the money: a qualified charitable distribution.
You can send up to $105,000 per year directly from an IRA to a charity, and it counts toward your required amount while staying out of your taxable income.
For retirees who give anyway, it's often the most efficient dollar they'll move all year.
If you've inherited an IRA from someone who died recently, different rules apply, and the penalties for missing those deadlines are just as real.
The rules changed in 2020, and plenty of heirs are still getting caught off guard.
Ask your custodian to set up an automatic annual distribution in November or early December.
That way the money moves before the holiday chaos and you never have to remember a deadline that comes with a 25% penalty attached.
The bottom line: this isn't a rule you can ignore and hope the IRS forgets.
It's one of the few financial deadlines in America that punishes silence.
Final Thoughts
Set the calendar reminder, check the math, and move the money before the year runs out.