If you're retired and sitting on a 401(k) or traditional IRA, the government has a message: it wants its cut.
Required minimum distributions, or RMDs, force you to withdraw a minimum amount from those accounts each year once you hit a certain age.
Miss it, and the penalty is one of the harshest in the tax code.
Here's the part that catches people off guard.
You don't get to skip an RMD just because you don't need the money.
The IRS requires the withdrawal whether you're spending it or not—and the entire amount typically counts as taxable income for that year.
Depending on your bracket, that can mean thousands of dollars owed on money you never wanted to touch.
Thanks to the SECURE 2.0 Act, the starting age moved to 73 for most people, with another bump to 75 scheduled down the road.
That gave some savers extra years of tax-deferred growth.
But for anyone already past the threshold, the clock is running every single year.
The penalty for skipping is steep: a 25% excise tax on the amount you should have withdrawn.
That can drop to 10% if you catch the mistake and correct it quickly.
Still, on a $10,000 missed distribution, you're looking at $2,500 gone—money that buys a lot of groceries, gas, or a chunk of the rent in most American cities.
Why this stings more right now: inflation has already squeezed household budgets.
Rent, groceries, and credit card interest have climbed, and many retirees are leaning on savings just to keep up.
When an RMD lands on top of Social Security and a pension, it can push you into a higher tax bracket—raising the cost of your Medicare premiums too.
There are a few legitimate ways to soften the blow.
One popular move is a qualified charitable distribution, which lets you send up to $105,000 (indexed for inflation) directly to charity and have it count toward your RMD—without adding to your taxable income.
Another is timing: taking your distribution in a low-income year or converting part of the account to a Roth earlier can reduce future RMD pain.
The simplest step is also the most overlooked.
Check your account's balance and your age now, not in April.
Many brokerages will calculate your RMD automatically, but the responsibility for taking it—and paying the tax—is yours.
Set a calendar reminder for early in the year so you're not scrambling in December when fund values swing.
Our take: RMDs aren't a punishment, but they're easy to ignore until the penalty shows up.
A little planning in your late 60s can save you real money in your 70s.
Final Thoughts
Talk to a tax professional before the deadline, not after.