Required minimum distributions are the government's way of saying it let your retirement account grow tax-free for decades, and now it wants its cut.
Once you hit your required beginning date, typically the year you turn 73 under current rules, you must withdraw a minimum amount from traditional IRAs and most workplace retirement plans each year.
Miss it, and the IRS charges an excise tax on the amount you should have taken but didn't.
The SECURE 2.0 Act cut it to 25%, and it drops to 10% if you fix the mistake within a specific correction window.
Better than before, still not a fee you want to volunteer for.
Here's the part that catches people: your account custodian doesn't always know when you turn 73.
Plenty of retirees ignore the notice, assume their advisor is handling it, or simply don't realize a Roth IRA doesn't carry the same requirement during the owner's lifetime.
The rule applies to traditional balances, not Roth ones.
The math itself is less scary than the paperwork.
You divide your prior year-end balance by a life expectancy factor from the IRS Uniform Lifetime Table.
If you're 73, that divisor is roughly 26.5, meaning you withdraw about 3.8% of the balance.
The percentage climbs every year, so the mandatory bite grows as you age.
First, the first-year deadline is the one real gift: you can delay your first RMD to April 1 of the following year.
But do that, and you'll stack two withdrawals into the same tax year, potentially pushing you into a higher bracket.
Second, if you have multiple IRAs, you can total the RMDs and take the whole amount from one account.
That flexibility does not extend to 401(k)s from different employers, which must each be satisfied separately.
Third, the still-working exception exists but is narrow.
You can sometimes defer RMDs from your current employer's plan if you're not a 5% owner.
That exception does not apply to IRAs, and it vanishes once you leave that job.
Custodians collect fees on balances that stay invested, the IRS collects deferred tax revenue, and a cottage industry of advisors and tax preparers earns money untangling it.
None of that makes the rule unfair, exactly, but it does explain why nobody is rushing to simplify it.
For households living on a fixed income, the real pain is timing.
A forced withdrawal in a down market locks in losses.
A forced withdrawal in a good year can trigger higher Medicare premiums two years later through IRMAA surcharges, plus taxation of Social Security benefits.
The withdrawal itself is not optional, but the planning around it absolutely is.
Practical moves: check your prior year-end balance each January, confirm your divisor, and consider a qualified charitable distribution if you're 70½ or older and give to charity.
QCDs can satisfy part or all of an RMD without adding to taxable income.
It's one of the few genuinely efficient workarounds left in the code.
Our take: RMDs are not a scandal, they're a bill arriving late.
The mistake is treating them as someone else's job.
Set a calendar reminder, verify your own numbers, and don't wait for the IRS letter to learn the rules.
Final Thoughts
The penalty got smaller, but the surprise still costs real money.