If you turned 73 this year, the IRS has a message: it wants its cut of your retirement accounts, whether you need the money or not.
It's called a required minimum distribution, and ignoring it can trigger one of the steepest penalties in the tax code.
Once you hit 73, you must withdraw a minimum amount each year from traditional IRAs, 401(k)s, and most other tax-deferred retirement accounts.
The exact figure is calculated by dividing your account balance by a number the IRS publishes based on your age.
At 73, that divisor is about 26.5, meaning you'd need to pull roughly 3.8% of your balance.
Miss the deadline and the penalty is 25% of the amount you should have withdrawn.
That drops to 10% if you fix the mistake within a two-year window, but it's still real money vanishing for no reason.
The deadline for most people is December 31, though your very first withdrawal can be delayed until April 1 of the following year — a one-time grace period that can backfire by forcing two taxable distributions into a single tax year.
You have options for keeping more of what you withdraw.
One of the most overlooked is the qualified charitable distribution.
If you're 70½ or older, you can send up to $105,000 per year directly from your IRA to a qualified charity.
That money counts toward your RMD but never shows up as taxable income, which can also help keep your Medicare premiums from rising.
If you don't need the cash, consider moving the shares you'd otherwise sell into a regular taxable brokerage account.
You'll owe income tax on the withdrawal, but the assets stay invested and keep growing.
This approach can also reduce future RMDs, since your tax-deferred balance shrinks.
Selling investments in a down market to satisfy an RMD locks in losses you might otherwise recover.
Some retirees take their distribution in kind — transferring shares rather than cash — to avoid that trap.
Roth IRAs have no RMDs during the owner's lifetime, but a Roth 401(k) does, unless it's been rolled into a Roth IRA.
If you're still working past 73, your current employer's 401(k) may be exempt, but that doesn't cover old accounts from previous jobs.
If your spouse is more than 10 years younger, different tables apply and your RMDs shrink.
If you inherited an IRA from someone who wasn't your spouse, the rules are tougher and generally require emptying the account within 10 years.
Most major brokerages will calculate your RMD for you and can set up automatic distributions.
That way you're not doing math in December while the IRS waits with a penalty slip.
Set a calendar reminder for early January, not April.
Confirm your account balances on December 31 of the prior year, since that's the figure the calculation uses.
And if you're unsure, a single hour with a tax professional usually costs far less than the 25% penalty.
The bottom line: RMDs aren't optional, but the tax bill they create is negotiable.
A few deliberate moves — charitable transfers, in-kind withdrawals, and cleaning up old accounts — can keep thousands in your pocket instead of the Treasury's.
Final Thoughts
Treat the deadline like a bill you actually want to pay attention to, because the IRS certainly will.