If you turned 73 this year, the IRS has a message for you: it's time to start withdrawing from your retirement accounts, whether you need the cash or not.
These mandatory withdrawals are called required minimum distributions, and they can quietly push you into a higher tax bracket if you don't plan ahead.
Once you hit 73, you must pull a minimum amount out of traditional IRAs and most workplace retirement plans every year.
The exact figure is calculated by dividing your account balance by a life expectancy factor the IRS publishes.
Skip a withdrawal, and the penalty is steep — 25% of the amount you should have taken, though it drops to 10% if you fix it quickly.
The first-year deadline trips up a lot of people.
You generally have until April 1 of the year after you turn 73 to take your very first distribution.
But here's the catch: if you delay that first one into the following year, you'll end up taking two taxable withdrawals in the same calendar year.
That double hit can shove you into a higher bracket and even raise your Medicare premiums two years later.
For many households, the smarter move is to take that first distribution on time and spread the tax pain out.
A retired couple with a $600,000 IRA could be looking at a required withdrawal of roughly $22,000 to $24,000 in year one, depending on the current factor.
Add Social Security and a pension, and suddenly a chunk of that money is taxed at 22% or higher instead of 12%.
There are a few legitimate ways to shrink the damage.
One is a qualified charitable distribution, which lets you send up to $105,000 per year directly from an IRA to a charity.
That money counts toward your RMD but never shows up as taxable income.
Another is converting part of a traditional IRA to a Roth in your 60s, before RMDs begin, when your income may be lower.
RMDs apply to each IRA separately, but you can pool the total and take it from any one account.
Workplace 401(k)s don't get that flexibility — each plan needs its own withdrawal.
And if your spouse is more than 10 years younger, special rules can shrink your required amount, but you have to make sure the plan administrator has it right.
Brokerages send reminders, but nobody forces you to click.
Set a calendar alert for early December each year, confirm the math with your custodian, and check that the withdrawal actually cleared before December 31.
The bottom line: RMDs aren't optional, but the tax bill they create is negotiable.
A little planning in your late 60s can save you thousands once the withdrawals start.
Final Thoughts
Treat that first deadline like a bill you can't ignore — because to the IRS, that's exactly what it is.