If you turned 73 this year and have money sitting in a traditional IRA or 401(k), the IRS expects its cut — and the penalty for missing it is one of the harshest in the tax code.
Required minimum distributions, or RMDs, force retirees to withdraw a set amount from tax-deferred accounts each year and pay income tax on it.
Miss the deadline, and the penalty is 25% of the amount you should have taken, dropping to 10% only if you fix it fast.
The rules shifted again under the SECURE 2.0 Act, and plenty of retirees are still working off outdated information.
The starting age moved from 72 to 73 in 2023, and it climbs to 75 in 2033.
If you hit 72 before 2023, you were already on the old schedule.
If you're turning 73 in 2025, this is your first RMD year — and the deadline is not Dec. 31 for everyone.
For your very first withdrawal, you get a one-time grace period: you can delay it until April 1 of the following year.
Take two RMDs in the same calendar year — your delayed first one plus your second — and you can get pushed into a higher tax bracket, trigger higher Medicare Part B and Part D premiums two years later, and possibly expose more of your Social Security to taxation.
Divide your account balance as of Dec. 31 of the prior year by the factor in the IRS Uniform Lifetime Table.
At 73, that factor is 26.5, so a $500,000 balance means a $18,868 withdrawal.
At 80, the factor drops to 20.2, meaning a bigger required bite from the same balance.
The percentage you're forced to pull grows every year.
One costly myth refuses to die: you cannot satisfy an RMD by converting that amount to a Roth IRA.
The IRS wants the money out of the tax-deferred account, taxed, and in your hands — or sent directly to a taxable account.
You can convert other dollars to a Roth, but the RMD itself must come out first.
Another common stumble is the aggregation rule.
You can total your RMDs across multiple traditional IRAs and take the full amount from just one account.
That flexibility does not extend to 401(k)s, which must each be calculated and paid separately.
And if your spouse is more than 10 years younger, a different table applies and lowers your required amount.
It only applies to a current employer's 401(k), not to IRAs, and not to old 401(k)s from former jobs.
If you own more than 5% of the business, it doesn't apply at all.
The practical move for most retirees is to set up an automatic annual or monthly distribution with the custodian, confirm it in writing, and calendar the deadline now.
For those who don't need the cash, a qualified charitable distribution can send up to $108,000 directly to charity in 2025 and count toward the RMD while staying out of taxable income.
Our take: RMDs are less a tax strategy than a deadline you either manage or get punished by.
Automating the withdrawal and checking the math once a year is boring, but it's the cheapest insurance against a 25% penalty.
Final Thoughts
If your balance is large or your accounts are scattered, an hour with a tax pro before December is money well spent.