If you turned 73 last year, the IRS has a message: you owe a withdrawal, whether you need the money or not.
Required minimum distributions, or RMDs, force retirees to pull a set amount from traditional IRAs and 401(k)s each year once they hit a certain age.
Miss the deadline, and the penalty is a 25% excise tax on the amount you should have taken — dropping to 10% if you fix it quickly.
The rule isn't new, but the age keeps shifting, and that's where people get tripped up.
The SECURE 2.0 Act pushed the starting age to 73 for those born 1951 through 1959, and to 75 for anyone born in 1960 or later.
Plenty of savers who spent decades hearing "70½" are now confused about which birthday actually triggers the clock.
You don't get to skip the withdrawal just because the market is down or you don't need the cash.
The amount is based on your account balance at the end of the prior year, divided by a life expectancy factor the IRS publishes.
If your portfolio jumped in a good year, your RMD jumps too — and so does the taxable income it creates.
That income can ripple outward in ways retirees don't expect.
A larger RMD can push you into a higher bracket, make more of your Social Security taxable, and raise your Medicare Part B and Part D premiums through income-related monthly adjustment amounts.
In other words, the withdrawal itself is only the first bill.
RMDs exist to make sure tax-deferred accounts eventually get taxed rather than passed on untouched forever.
That's a legitimate policy goal, but it's worth naming clearly: the deadline serves the Treasury first and the retiree second.
The financial industry profits too, just less obviously.
Custodians must report RMDs, advisors charge fees to calculate them, and plenty of firms market "RMD solutions" — annuities, bond ladders, managed payout funds — that come with their own costs.
Some of these products are genuinely useful.
Others are a commission looking for a problem.
There are legal ways to soften the blow, and they're worth knowing.
Qualified charitable distributions let you send up to $105,000 per year directly from an IRA to charity, and that amount counts toward your RMD while staying out of your taxable income.
If you're still working and don't own more than 5% of your employer, you may be able to delay RMDs on that specific 401(k).
And a Roth conversion in a low-income year can shrink future RMDs, though it triggers taxes now.
The first RMD has a special grace period — you can delay it until April 1 of the following year — but that means taking two distributions in one tax year, which can shove you into a higher bracket.
Most retirees are better off taking the first one on schedule.
Automatic withdrawals can help you avoid the penalty, but verify the math yourself or with a tax professional.
Custodian calculators aren't always right, especially if you hold multiple IRAs or inherited accounts, which follow separate and stricter rules.
And if you've already missed one, file Form 5329 and request a waiver — the IRS often grants it when you correct the mistake promptly.
The honest take: RMDs are less a retirement benefit than a scheduled tax payment with extra steps, and the shifting age rules have made a confusing system worse.
If you're anywhere near 73, treat this as a deadline on your calendar, not a detail to sort out in April.
Final Thoughts
The penalty is real, the grace periods are narrow, and nobody is going to remind you twice.