If you turned 73 this year and have money sitting in a traditional IRA or 401(k), the IRS has a message for you: it's time to start withdrawing.
Required Minimum Distributions, or RMDs, are the government's way of finally collecting taxes on retirement savings you deferred for decades.
Miss the deadline, and the penalty stings.
Here's what's changed and what it costs you.
The age threshold moved to 73 under the SECURE 2.0 Act, up from the old 72.
That means anyone born in 1951 or later waits an extra year before mandatory withdrawals kick in.
But once you hit the trigger age, the clock starts every single year — and the IRS does not offer grace periods on the amount, only on the first-year timing.
The penalty for skipping an RMD is brutal: 25% of the amount you should have withdrawn.
If you catch the mistake and correct it promptly, that drops to 10%.
Still, on a $20,000 missed distribution, that's up to $5,000 gone for a paperwork lapse.
How much you must pull out depends on your account balance and a life expectancy factor the IRS publishes in tables.
Divide your Dec. 31 balance by that factor.
A 73-year-old typically uses roughly 26.5, meaning about 3.8% of the account.
The percentage climbs each year, which is exactly how the system forces the money out — and into your taxable income.
You can delay your very first RMD until April 1 of the following year, but that means taking two distributions in the same tax year — a potential bracket jump.
Most advisors say take the first one on schedule to avoid the double hit.
Roth IRAs have no RMDs during the owner's lifetime.
But Roth 401(k)s now fall under the same no-withdrawal rule as Roth IRAs, a change that took effect in 2024.
If you're still working and own less than 5% of the company, your current employer's 401(k) can also wait until you retire.
The practical move for most households: set up an automatic distribution in the fall, not December.
Fund managers get swamped at year-end, and a processing delay can push you past the deadline.
Automating it also stops the single biggest cause of penalties — simply forgetting.
One more wrinkle for anyone with multiple IRAs: you calculate the RMD separately for each account, but you can take the total from any one or combination of them.
That flexibility doesn't extend to 401(k)s, which must each pay out on their own.
If you inherit an IRA, different rules apply, and they tightened significantly for most non-spouse beneficiaries.
Those accounts generally must be emptied within 10 years, and annual RMDs may apply along the way depending on the relationship. **Our take:** RMDs aren't a penalty, they're the bill coming due on a tax break you already spent.
The smart play is planning withdrawals years ahead so they land in low-income brackets rather than blindsiding you at 73.
Final Thoughts
Automate the distribution, check the math with a tax pro, and treat the deadline like any other bill — because the IRS certainly will.