If you turned 73 this year, the IRS has a message: it wants its cut of your retirement account, whether you need the money or not.
Required minimum distributions, or RMDs, force you to withdraw a minimum amount from traditional IRAs and most 401(k)s every year once you hit that age.
Miss the deadline and the penalty is brutal—25% of the amount you should have taken, though it drops to 10% if you correct the mistake quickly.
You can't skip it because you're still working, because markets are down, or because you'd rather let the account compound.
The IRS calculates your minimum using your account balance at the end of the prior year divided by a life expectancy factor.
Withdraw too little, and you're writing a check to the government on top of the taxes you already owe.
Every dollar pulled from a traditional IRA or 401(k) counts as ordinary income.
That can push you into a higher bracket, inflate your Medicare Part B and Part D premiums through income-related monthly adjustment amounts, and even make more of your Social Security benefits taxable.
Retirees who spent decades saving diligently sometimes find their tax bill in retirement higher than it was during their working years.
You generally must take your first RMD by April 1 of the year after you turn 73—but if you delay that first one, you'll have to take two in the same calendar year.
Stacking two withdrawals into one tax year can shove you into a higher bracket and trigger those Medicare surcharges.
Most financial planners suggest taking the first RMD in the year you actually turn 73 to avoid the double-up.
There's one big exception: Roth IRAs have no RMDs during the owner's lifetime, which is a major reason they've become a favorite tool for estate planning.
Roth 401(k)s used to require withdrawals, but that rule disappeared starting in 2024.
If you're still working and own less than 5% of the business sponsoring your 401(k), you may be able to delay RMDs from that plan until you retire.
Qualified charitable distributions let you send up to $105,000 per year directly from an IRA to charity, and that money counts toward your RMD without adding to your taxable income.
Converting part of a traditional IRA to a Roth in low-income years can shrink future RMDs.
And if you don't need the cash, you can reinvest the after-tax proceeds in a regular brokerage account, where it can keep growing.
The deadline is December 31 for every RMD after your first one.
There's no extension, no grace period, and no do-over.
Set a calendar reminder, check your account balance early in the year, and confirm the exact figure with your custodian rather than estimating.
RMDs are one of the few retirement rules you can't outsmart—only plan around.
Ignoring them doesn't make the tax bill disappear; it just adds a penalty on top.
Final Thoughts
A little attention each fall can save thousands in avoidable costs.