If you turned 73 last year, there's a good chance the IRS is waiting on a form you haven't thought about since your last birthday cake.
It's called a required minimum distribution, or RMD, and it's the government's way of finally collecting taxes on the money you sheltered in retirement accounts for decades.
Miss the deadline and the penalty is one of the harshest in the tax code.
Once you hit your required beginning date, you must pull a minimum amount out of traditional IRAs, 401(k)s, and most other tax-deferred workplace plans every single year.
That withdrawal gets added to your taxable income, whether you need the cash or not.
You can always take more than the minimum.
The classic mistake is the very first year, because the rules give you a one-time grace period that trips people up.
For your first RMD, you can delay the withdrawal until April 1 of the following year.
Sounds generous, but it means you'd take two taxable distributions in the same calendar year, which can push you into a higher bracket or inflate your Medicare premium two years later.
Most financial planners will tell you to just take the first one on time and skip the double-up.
After that first year, every deadline is December 31.
There are no extensions, no grace periods, and no exceptions for being busy or confused.
If you miss it, the IRS can hit the shortfall with an excise tax that recently stood at 25%.
Take the money out late and fix it promptly, and that can drop to 10%.
Still, on a missed $20,000 withdrawal, that's real money gone for a paperwork error.
You divide your account balance as of December 31 of the prior year by a life expectancy factor from an IRS table.
Because those factors shrink as you age, your required percentage grows over time.
Roughly speaking, it starts near 3.8% at age 73 and climbs past 5% by your early 80s.
If your portfolio had a rough year, the math doesn't care.
Roth IRAs have no RMDs during the owner's lifetime, which is a big part of why they're popular.
But a Roth 401(k) does require withdrawals unless it's been rolled into a Roth IRA.
And if you own multiple traditional IRAs, you can total them up and take the whole distribution from just one account.
Workplace plans like 401(k)s generally can't be lumped together that way, so each one needs its own withdrawal.
If you're still working past 73 and aren't a 5% owner of the business, you may be able to skip RMDs on your current employer's 401(k).
That exception doesn't apply to IRAs, and it doesn't cover old 401(k)s from former jobs.
If you inherited an IRA from someone who wasn't your spouse, different rules apply and the deadlines can be tighter.
Set a calendar reminder for early December, not late December, so there's time to fix a snag.
Ask your custodian to set up an automatic distribution.
If you're charitably inclined, a qualified charitable distribution can satisfy the RMD and keep the money out of your taxable income entirely, which is one of the few genuinely clean tax breaks left.
The bottom line: this isn't a rule you can ignore and hope the IRS overlooks.
Custodians report these accounts, and mismatches get flagged.
Final Thoughts
Spending twenty minutes with your account statements now beats writing a five-figure check to the government later for the privilege of doing nothing.