If you're turning 73 this year, the IRS has a birthday present waiting — and it's not a check.
It's a required minimum distribution, or RMD, and it forces you to start pulling money out of your traditional 401(k) and IRA whether you need the cash or not.
Miss the deadline and the penalty is brutal: 25% of the amount you should have withdrawn, dropping to 10% if you fix it within a two-year correction window.
On a $40,000 missed withdrawal, that's $10,000 gone — money that could have paid property taxes, a car repair, or six months of groceries.
Your RMD is calculated by dividing your account balance at the end of the previous year by a life expectancy factor the IRS publishes.
So a $500,000 IRA produces an RMD of about $18,868.
At 80, the factor shrinks to 20.2 — pushing the required withdrawal on that same balance to roughly $24,752.
The deadline catches people in two different traps.
For your very first RMD, you get until April 1 of the following year.
Take it then, and you'll owe two RMDs in the same tax year — one for the year you turned 73 and one for the year after.
That can shove you into a higher bracket and trigger higher Medicare Part B and Part D premiums two years later.
For every year after the first, the deadline is December 31.
No extensions, no grace period, no exceptions for a bad market year.
RMDs apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and most 401(k)s — but not to Roth IRAs, which have no lifetime distribution requirement.
If you're still working past 73 and own less than 5% of the company, your current employer's 401(k) may be exempt until you retire.
The rules are stiffer on inherited accounts.
Most non-spouse beneficiaries now have to drain an inherited IRA within 10 years, and in many cases RMDs apply during that window too.
One relief valve: you can send up to $105,000 per year directly from an IRA to a qualified charity as a qualified charitable distribution.
It counts toward your RMD but never shows up as taxable income — a real lever for anyone trying to stay under an IRMAA threshold.
The simplest defense is a standing calendar reminder set for early December, plus a call to your custodian in November to confirm the exact figure.
Custodians calculate RMDs, but the taxpayer — not the brokerage — carries the penalty if it's wrong.
If you hold multiple IRAs, you can take the total from any one of them, which gives you room to sell from whichever account is cheapest to unwind.
If you've already missed one, don't wait.
File Form 5329, request the waiver, and pay the corrected amount.
The IRS grants relief more often than people assume, but only when you move first.
The RMD isn't really a retirement rule — it's a tax collection schedule dressed up as one.
Final Thoughts
Treat it like a bill with a hard due date, because that's exactly what it is.