Required minimum distributions are one of the few retirement rules with a hard deadline, and they trip up more households than most people realize.
Once you hit a certain age, the IRS doesn't ask whether you need the money — it requires you to withdraw a set amount from tax-deferred accounts like traditional IRAs and 401(k)s each year.
The starting age has shifted in recent years.
Under current law, most retirees must begin taking RMDs at age 73, up from the old 70½ threshold.
A later provision pushes that to 75 for people born in 1960 or later.
That single change gives some savers a few extra years of tax-deferred growth, but it also means bigger balances — and bigger required withdrawals — down the road.
The math matters because RMDs are calculated by dividing your account balance by a life expectancy factor the IRS publishes each year.
As you age, that factor shrinks, so the percentage you must pull out climbs.
A 75-year-old might withdraw roughly 4 percent, while an 85-year-old could be forced to take out more than 6 percent — whether the market is up or down.
If stocks are down in a given year, you still have to sell enough to satisfy the requirement, potentially locking in losses.
If you're still working and have a 401(k) at that job, you may be able to delay RMDs on that specific plan, but the exception is narrow and doesn't cover IRAs.
Many retirees discover too late that a forgotten old 401(k) from a former employer still triggers a distribution.
The penalty for skipping or underpaying is one of the harshest in the tax code.
It used to be 50 percent of the shortfall.
Recent legislation cut it to 25 percent, and it drops to 10 percent if you correct the mistake quickly.
Even so, a missed $10,000 withdrawal could mean a $2,500 hit before you even pay income tax on the money.
There are legitimate ways to soften the blow.
Qualified charitable distributions let you send up to $100,000 a year from an IRA directly to charity, and those amounts can count toward your RMD.
Timing withdrawals in low-income years, or converting some funds to a Roth earlier, can reduce the taxable pile later.
None of these moves are automatic — they require planning well before the deadline.
What often catches people off guard is that RMDs can push them into a higher tax bracket, raise Medicare premium surcharges, or make more of their Social Security taxable.
A withdrawal that looks modest on paper can ripple through your entire financial picture.
The takeaway is simple: know your start date, check every tax-deferred account you own, and don't assume a brokerage will handle it for you.
Custodians typically send reminders, but the responsibility lands on you.
Set a calendar alert, confirm your balance in December, and consider talking to a tax professional before year-end.
Final Thoughts
The rules aren't going away — and the cost of ignoring them is real.