If you turned 73 this year, the IRS has a message: it wants its cut of your retirement account, whether you need the money or not.
It's called a required minimum distribution, or RMD, and it forces savers to start pulling money out of traditional 401(k)s and IRAs once they hit a certain age.
The rule exists because those accounts were never taxed on the way in.
You got a deduction when you contributed, so the government eventually wants its tax revenue on the way out.
RMDs are how it guarantees that happens during your lifetime.
For 2025, anyone who turns 73 must take their first withdrawal by April 1, 2026.
Miss that deadline, and the penalty is steep: 25% of the amount you should have taken, dropping to 10% if you fix it quickly.
On a $40,000 missed distribution, that's up to $10,000 gone.
The IRS divides your account balance by a life expectancy factor from its Uniform Lifetime Table.
At 73, that divisor is about 26.5, so a $500,000 balance means roughly $18,900 must come out this year.
At 80, the divisor shrinks to about 20.2, pushing the required amount higher.
That withdrawal counts as ordinary income.
It can push you into a higher bracket, increase what you pay for Medicare Part B and Part D, and even trigger taxes on Social Security benefits.
Retirees who also collect a pension or work part-time often feel the squeeze hardest.
Since the money is out of the tax-deferred account, you can spend it, reinvest it in a regular brokerage account, or convert it to a Roth IRA.
A Roth conversion won't satisfy the RMD itself, but it can reduce future required withdrawals by shrinking the balance that gets taxed later.
If you're still working and own a 401(k) at that employer, you may be able to delay RMDs until you actually retire.
That exception doesn't apply to IRAs or to old 401(k)s from former jobs.
It also doesn't apply if you own more than 5% of the company.
One more wrinkle: Roth IRAs have no RMDs during the owner's lifetime, which is why they've become a favorite tool for estate planning.
Roth 401(k)s used to require them, but that rule disappeared starting in 2024.
If you're near 73, check your balances, calculate the divisor, and mark the deadline.
Automating the withdrawal through your custodian is the easiest way to avoid a penalty that funds nothing but the Treasury's coffee budget.
Our take: RMDs are one of the few retirement rules with zero flexibility, so treat the deadline like a mortgage payment.
Final Thoughts
A five-minute call to your broker now beats a five-figure penalty later.