If you turned 73 this year, the IRS expects a slice of your retirement account whether you need the money or not.
It's called a required minimum distribution, and it's one of the few things in personal finance that arrives with a deadline attached and a penalty if you ignore it.
Once you hit 73 (or 75 if you were born in 1960 or later), you must start pulling money out of traditional IRAs and most workplace retirement plans each year.
The amount is calculated from your account balance and an IRS life expectancy table.
Skip it, and the penalty is 25 percent of what you should have withdrawn — dropping to 10 percent if you fix it within a correction window.
Miss a $20,000 withdrawal and you could be looking at $5,000 gone, just for leaving money where it was.
Because these accounts were funded with pre-tax dollars, and the government waited decades for its cut.
Your withdrawal amount changes every year based on your December 31 balance and your age.
Markets drop, your balance drops, your required amount drops — but you still have to take something.
In a bad year, you're selling into weakness because a formula says so.
Then there's the group this trips up most: people who don't need the money.
If you're still working and have a 401(k) at that job, you may be able to delay.
But that exception doesn't apply to traditional IRAs, and it doesn't apply to old 401(k)s from former employers.
Plenty of people learn this the hard way in April.
Roth IRAs have no lifetime RMDs for the original owner, which is a real advantage.
But Roth 401(k)s used to require them — that changed starting in 2024, and not everyone has caught up.
If you're holding an old Roth 401(k), it may be worth checking whether rolling it makes sense for your situation.
The newest wrinkle involves inherited accounts.
Since the SECURE Act, most non-spouse heirs must empty an inherited IRA within 10 years, and the IRS has been issuing and revising guidance on exactly when annual withdrawals are required during that window.
The rules have shifted enough times that anyone who inherited an account in the last few years should verify their plan rather than assume.
Accountants, custodians, and the software companies selling RMD calculators.
The rest of us get a deadline and a penalty.
What you can actually do: check whether you're subject to RMDs this year, confirm your custodian's automatic distribution settings, and make sure any withdrawal happens early enough that it isn't still processing on December 31.
Automatic setups exist for a reason — they remove the chance of a human forgetting.
One more thing worth knowing: if you're charitably inclined and over 70½, a qualified charitable distribution can count toward your RMD and keep the money out of your taxable income.
It's one of the few genuinely useful loopholes left, and it's routinely overlooked.
The takeaway here isn't that RMDs are unfair — the tax deferral was always a loan, not a gift.
It's that the rules are complicated, the deadlines are real, and the penalty for a clerical oversight is steep.
Automate it, verify it, and don't assume your custodian is watching out for you.
Final Thoughts
They're processing transactions, not managing your retirement.