If you turned 73 this year, the IRS has a message: it's time to start withdrawing from your retirement accounts, whether you need the money or not.
Required Minimum Distributions, or RMDs, force savers to pull a minimum amount from traditional IRAs and most 401(k)s annually once they hit a certain age.
Miss that deadline and the penalty is steep.
The IRS charges 25% of the amount you should have withdrawn, though that drops to 10% if you fix the mistake within a two-year window.
On a $20,000 missed distribution, that's up to $5,000 vanishing for a paperwork slip.
The rules shifted under the SECURE 2.0 Act.
Anyone who turned 72 after 2022 can wait until 73, and in 2033 the starting age rises to 75.
That delay gives savers a few extra years of tax-deferred growth, but it also means larger balances and bigger forced withdrawals down the road.
Your first RMD comes with a grace period.
You can take it by April 1 of the year after you turn 73, but that means two taxable withdrawals landing in the same calendar year.
That double hit can push you into a higher bracket, raise your Medicare Part B and D premiums through income-related surcharges, and make more of your Social Security benefits taxable.
Divide your account balance from December 31 of the prior year by the life expectancy factor the IRS publishes in its Uniform Lifetime Table.
At 73, that factor is 26.5, so a $500,000 IRA requires about $18,868.
By 85, the factor falls to 16, pushing the same balance toward $31,250.
Roth IRAs have no RMDs during the owner's lifetime, which is why some advisors suggest converting traditional balances while your tax rate is low.
If you're still working and own less than 5% of the company, your current employer's 401(k) can also wait until you retire.
The most common mistake is forgetting an account.
People with multiple IRAs sometimes satisfy one and neglect another.
The good news is you can total your RMDs across IRAs and withdraw from just one, but 401(k)s must each be handled separately.
A simple fix is setting up automatic distributions through your custodian, timed to land before December 31.
Just remember the year-one trap: if you delay your first RMD to early next year, you still owe the second one by that December.
Qualified charitable distributions offer another escape hatch.
Once you're 70½, you can send up to $105,000 per year directly from an IRA to charity, and that money counts toward your RMD without adding to taxable income.
For retirees who don't need the cash, it's one of the few clean ways to shrink the tax bill.
The bottom line: RMDs aren't optional, and treating them as an afterthought can cost real money.
If you're approaching 73, check your balances, confirm your custodian's deadlines, and consider whether a Roth conversion or charitable transfer makes sense before the IRS decides for you.
Final Thoughts
A little planning now beats writing a check to the penalty department later.