If you turned 73 this year and have a traditional IRA or 401(k), the IRS wants its cut.
Required minimum distributions, the annual withdrawals Uncle Sam forces on retirement accounts, are back in the spotlight for 2025, and the math is pinching more households than most people expect.
Here's the blunt version: once you hit the age threshold, you cannot leave that money sitting untouched forever.
The government spent decades giving you a tax break on the way in, and now it wants the taxes on the way out.
Skip the withdrawal and the penalty is 25% of what you should have taken, dropping to 10% if you fix it quickly.
If you were born in 1950 or earlier, your starting age was 70½.
That two-year gap has tripped up plenty of people who read an old article and assumed they had more time.
What catches retirees off guard is how the withdrawal is calculated.
You divide your account balance by a number the IRS publishes each year based on your age.
At 73, that divisor is about 26.5, meaning roughly 3.8% of your balance comes out whether you need the cash or not.
The amount is based on your balance at the end of the prior year.
So if the market rallied hard in 2024, your 2025 distribution is larger, and so is the tax bill.
Retirees who watched their accounts climb are now discovering that a good year on Wall Street can trigger a bad year at tax time.
There's a second trap: the money doesn't have to be spent, but it does have to leave the tax-advantaged account.
You can move it to a regular brokerage account, but you'll owe income tax on the withdrawal either way.
For someone in a higher bracket, that can mean thousands of dollars vanishing before the money ever hits a checking account.
Financial advisors who charge fees on managed withdrawals.
And the entire tax-planning industry built around Roth conversions, which exist largely because RMDs are so unpopular.
You can satisfy the requirement from one account or several, as long as the total comes out.
You can take it monthly instead of in one lump, which sometimes softens the tax hit.
And the first-year deadline is April 1 of the following year, but doubling up in year two has wrecked many retirees' brackets.
If you're still working and own a 401(k) at that job, you may be able to delay.
The people most exposed here aren't the wealthy, who plan around this stuff.
They're middle-class savers who did the responsible thing for 40 years and now face a mandatory taxable event they never budgeted for.
Our take: RMDs are a reminder that retirement accounts were never really yours in the tax-free sense people imagine.
The government was always a silent partner.
Final Thoughts
The smartest move is figuring out your number in January, not December, and talking to a tax professional before the IRS does the math for you.