If you're retired with a 401(k), traditional IRA, or similar tax-deferred account, the government eventually wants its cut.
That's the whole point of a Required Minimum Distribution, or RMD — the amount you're forced to withdraw each year once you hit a certain age.
Miss it, and the penalty is one of the harshest in the tax code.
The starting age has shifted in recent years.
Thanks to the SECURE 2.0 Act, most people now begin RMDs at 73, up from the old 72, and it rises to 75 in 2033.
If you turned 72 before 2023, the older rules still apply to you.
Getting it wrong can cost you real money.
Here's the sting: the penalty for skipping or under-withdrawing is 25% of the amount you should have taken.
If you fix the mistake quickly, it can drop to 10%.
On a $20,000 missed withdrawal, that's still $2,000 to $5,000 gone — money that could've stayed in your pocket.
Your RMD is generally your account balance at the end of the prior year, divided by a life expectancy factor from IRS tables.
Because that factor shrinks as you age, your required percentage grows over time.
A 73-year-old might need to pull roughly 3.8%, while an 80-year-old faces closer to 4.9%.
A few details that catch retirees off guard.
You can delay your first RMD until April 1 of the following year — but if you do, you'll take two taxable withdrawals in the same year, which can bump you into a higher bracket.
Roth IRAs have no RMDs during your lifetime, and Roth 401(k)s no longer require them either.
And if you have multiple IRAs, you calculate each one separately but can withdraw the total from any single account.
Non-spouse beneficiaries who inherited accounts after 2019 often must drain them within 10 years under the "10-year rule." The IRS has been phasing in enforcement, and this is where many families get blindsided by surprise tax bills.
If you're still working and don't own more than 5% of your employer, you may be able to skip RMDs on that workplace plan until you retire.
You can also use a Qualified Charitable Distribution to send up to $105,000 directly to charity, which counts toward your RMD and keeps it out of taxable income.
And remember to check whether your state taxes retirement withdrawals — many don't, but some do.
The bottom line: RMDs aren't optional, and the rules keep moving.
Mark your calendar, confirm your age bracket, and talk to a tax professional before December, not after.
Our take: RMDs are one of those quiet retirement landmines that punish people for simply not knowing the deadline.
Final Thoughts
Set a yearly reminder, verify your numbers with a pro, and don't let a paperwork oversight hand thousands of your hard-earned savings to the IRS.