If you turned 73 this year and have money sitting in a traditional IRA or 401(k), the IRS expects a cut of it.
Required minimum distributions, or RMDs, are the government's way of finally collecting taxes on retirement accounts you spent decades deferring.
Miss the deadline and the penalty is 25% of the amount you should have withdrawn — a fee that can wipe out thousands in a single paperwork lapse.
Here's the part that trips people up: the calculation isn't based on what you need to spend.
It's based on your account balance at the end of the prior year, divided by an IRS life expectancy factor.
A 73-year-old with $500,000 in an IRA typically has to pull roughly $18,900 whether they want to or not.
That withdrawal lands on your tax return as ordinary income.
For retirees already collecting Social Security, a large RMD can push more of those benefits into the taxable column — a sneaky ripple effect most people don't plan for.
The SECURE 2.0 Act pushed the starting age to 73 for anyone born between 1951 and 1959, then to 75 for those born in 1960 or later.
That means two people the same age could have different deadlines depending on their birth year.
There's a silver lining for the newly retired: RMDs don't apply to Roth IRAs during the owner's lifetime.
If you're still working and planning conversions, moving money into a Roth before RMDs kick in can shrink future required withdrawals — and the tax bill that comes with them.
For anyone with multiple accounts, the rules get murkier.
Traditional IRAs can be aggregated, so you can take the full RMD from just one IRA.
But 401(k)s and 403(b)s generally must be calculated and withdrawn separately from each plan.
Miss one and the penalty applies to that account alone.
The 25% penalty drops to 10% if you catch the mistake and correct it within a two-year window, according to IRS guidelines.
That correction involves filing a special form, and the relief isn't automatic — it's granted case by case.
One workaround worth knowing: a qualified charitable distribution lets you send up to $105,000 per year directly from an IRA to a charity.
That amount counts toward your RMD and never shows up as taxable income.
For charitably inclined retirees, it's often the single most efficient move available.
The simplest defense is a calendar reminder set for early December — not late December.
Brokerages get slammed with last-minute requests, and a processing delay can turn a routine withdrawal into a penalty notice.
If you inherited an IRA from someone who died in 2020 or later, different rules apply, and many non-spouse beneficiaries now face a 10-year window with annual withdrawals required in some cases.
Our take: RMDs aren't complicated, but they're unforgiving of procrastination.
Automating the withdrawal through your custodian costs nothing and removes the single biggest risk — forgetting.
Final Thoughts
Spend twenty minutes with your account statements this month, and the IRS stays out of your business.