If you turned 73 this year, the IRS has a reminder waiting for you: it wants its share of your retirement account.
Required minimum distributions, or RMDs, are the mandatory withdrawals you must take from traditional IRAs and most workplace retirement plans once you hit a certain age.
Miss one, and the penalty is 25% of the amount you should have withdrawn, dropping to 10% if you fix it quickly.
The rule applies to traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred accounts.
Roth IRAs are the big exception, since you already paid taxes on that money.
The age threshold moved to 73 starting in 2023, and it climbs to 75 in 2033.
Your first withdrawal deadline is April 1 of the year after you turn 73, but every year after that, the money must come out by December 31.
The size of your check depends on two things: your account balance at the end of the previous year and a life expectancy factor from IRS tables.
A rough rule of thumb says retirees pull somewhere around 3.8% to 4% of their balance in their mid-70s, with the percentage rising as they age.
On a $500,000 account, that's roughly $19,000 in taxable income that lands on your return whether you need the cash or not.
That tax hit is where people get tripped up.
The withdrawal counts as ordinary income, which can push you into a higher bracket, increase what you pay for Medicare premiums, and shrink your Social Security benefits if you're still below full retirement age.
Some retirees who don't need the money simply reinvest it in a regular brokerage account, where future growth isn't taxed until they sell.
If you're still working and don't own more than 5% of the company, you may be able to delay RMDs in your current employer's 401(k) until you actually retire.
You can also direct up to $105,000 per year straight to charity through a qualified charitable distribution, which satisfies the RMD without adding to your taxable income.
Converting some traditional IRA money to a Roth in your 60s, before RMDs begin, can lower future required withdrawals too.
The most common mistake is simple math: people with several IRAs sometimes assume they must take a distribution from each one.
You can actually total the amounts and pull the whole sum from a single IRA.
Workplace plans like 401(k)s don't get that flexibility and generally must be handled account by account.
If you've inherited an IRA from someone who died in 2020 or later, different rules apply, and most non-spouse heirs now face a 10-year window to empty the account.
Those rules have been shifting, so it's worth checking the IRS website or talking to a tax pro before you guess.
Skipping an RMD is one of the easiest ways to hand the government extra money for no reason.
Set a calendar reminder for early December each year, confirm the exact figure with your custodian, and take the withdrawal before the clock runs out.
The bottom line: RMDs aren't optional, but the tax damage is manageable with a little planning.
A 20-minute conversation with a tax professional now can save you thousands later.
Final Thoughts
Treat the deadline like any other bill, and it stops being a surprise.