Required minimum distributions, or RMDs, are the government's way of making sure it eventually collects tax revenue on the money you sheltered in retirement accounts.
Once you hit a certain age, you must withdraw a minimum amount each year from traditional IRAs, 401(k)s, and similar plans, whether you need the cash or not.
Miss the deadline and the penalty can bite hard.
The rules shifted recently, and that change is tripping up a lot of retirees.
Thanks to the SECURE 2.0 Act, the starting age moved to 73 for most people, and it's set to rise to 75 in 2033.
If you turned 72 before 2023, you were already in the system.
If you're turning 73 now, this is the year the clock starts ticking.
Here's the part that catches people off guard: the deadline isn't a suggestion.
You generally must take your first RMD by April 1 of the year after you turn 73, then by December 31 every year after that.
Miss one, and the IRS can slap a 25% excise tax on the amount you should have withdrawn — though that drops to 10% if you correct it quickly.
The size of your withdrawal depends on your account balance and an IRS life expectancy factor.
A common mistake is calculating it on the wrong balance or forgetting that each IRA has its own RMD, even if you can consolidate withdrawals across accounts.
For households already squeezed by inflation, an RMD can push taxable income higher than expected.
That can trigger higher Medicare premiums, reduce Social Security taxation thresholds, and bump you into a steeper bracket.
In other words, a forced withdrawal can cost more than the tax on the withdrawal itself.
There's a silver lining for charitably minded retirees.
A qualified charitable distribution lets you send up to $105,000 per year directly from an IRA to a qualified charity, which can satisfy your RMD without adding to your taxable income.
For some households, that's the single most efficient move available.
If you're still working and own a 401(k) at that job, you may be able to delay RMDs from that specific plan until you retire, depending on the rules.
That exception does not apply to traditional IRAs.
Many people learn this distinction the hard way.
The takeaway is simple: this isn't a set-it-and-forget-it item.
Check your balance, confirm your deadline, and talk to a tax professional before December sneaks up.
A little planning can keep more of your money working for you instead of going to penalties and surprise tax bills. **Our take:** RMDs aren't a punishment, but they are a deadline that rewards the prepared and penalizes the distracted.
If you're anywhere near 73, put this on your calendar now and revisit it every fall.
Final Thoughts
The households that plan ahead tend to keep far more of what they saved.