You've Been Saving for Decades—Now the IRS Wants Its Cut

Picture this: You're 72 years old, happily retired, and your retirement account has grown to $500,000. You've paid taxes on your contributions, watched the market do its thing, and now you're ready to enjoy the fruits of your labor. Then a letter from your brokerage arrives: "Time to start taking Required Minimum Distributions."

If that sentence makes you want to throw your coffee mug, you're not alone. RMDs are one of those retirement realities that nobody talks about at dinner parties. But ignoring them can cost you—literally. The penalty for missing an RMD used to be 50% of the amount you should have withdrawn. As of 2026, it's a still-painful 25%. That's $25,000 on a missed $100,000 withdrawal.

Here's the good news: The SECURE 2.0 Act, passed in late 2022, changed the rules in your favor. The age when you must start taking RMDs jumped from 72 to 73. And if you're still working at 73, you might not have to take RMDs from your current employer's 401(k) at all. Let's break down exactly what you need to know—no jargon, no fluff.

When the Clock Starts Ticking: Age 73 Is the New 72

For years, the magic number was 70½. Then it moved to 72 in 2020. Now, thanks to the SECURE 2.0 Act, the starting line is age 73 for anyone who turns 73 after December 31, 2022. If you were born in 1951 or later, you're affected by this change.

Here's where it gets tricky: Your first RMD must be taken by April 1 of the year after you turn 73. That's called your "required beginning date." So if you turn 73 in July 2026, you have until April 1, 2026, to take your first distribution. But—and this is a big "but"—you still have to take your second RMD by December 31, 2026. That means you could end up taking two RMDs in one year, which could push you into a higher tax bracket.

Practical tip: Most financial advisors recommend taking your first RMD by December 31 of the year you turn 73, not waiting until the April 1 deadline. This avoids the double-withdrawal scenario and keeps your taxable income more predictable.

What About Roth Accounts? (Spoiler: You're Off the Hook)

Roth IRAs have always been the rebel of the retirement world. You contribute after-tax dollars, and withdrawals in retirement are tax-free. But here's a nuance that surprises many people: Traditional IRA owners must take RMDs starting at age 73, but Roth IRA owners never have to take RMDs during their lifetime.

This is a huge advantage. If you've been doing Roth conversions or contributing to a Roth 401(k), you can let that money grow tax-free for as long as you live. The only exception is if you inherit a Roth IRA—then the RMD rules apply to the beneficiary.

Actionable takeaway: If you're approaching 73 and have a mix of traditional and Roth accounts, consider withdrawing from your traditional IRA first to let your Roth continue growing untouched. This strategy can reduce your future RMD amounts and lower your lifetime tax bill.

How to Calculate Your RMD: It's Not as Scary as It Sounds

The IRS doesn't just say "take out some money." They have a specific formula based on your account balance and your life expectancy. Here's how it works: You take your retirement account balance as of December 31 of the previous year, and divide it by a "distribution period" factor from the IRS's Uniform Lifetime Table.

For example, let's say you're 75 years old with a $400,000 traditional IRA. According to the 2026 IRS table, the distribution period for age 75 is 24.6. Your RMD would be $400,000 ÷ 24.6 = $16,260. That's the minimum you must withdraw that year. You can always take more, but you can't take less.

The table changes every year as you age, so your RMD amount will increase over time—not because you're withdrawing more, but because the divisor gets smaller. At age 80, the divisor drops to 20.2, so your RMD on the same $400,000 would be $19,802.

Practical tip: Most brokerages and retirement plan providers will calculate your RMD for you automatically if you ask. But don't assume they'll send you a reminder. Set a calendar alert for November each year to check your account and ensure the withdrawal happens before December 31.

What If You Have Multiple Retirement Accounts?

If you have multiple traditional IRAs, you can calculate your total RMD for all of them combined, then withdraw the full amount from a single IRA. The IRS doesn't care which account the money comes from, as long as the total is correct. But 401(k) plans are different—you must take RMDs from each 401(k) separately, unless your employer allows you to aggregate them.

This is a common pitfall. People with three old 401(k)s from previous jobs often forget about one of them. The IRS doesn't accept "I forgot" as an excuse. If you miss an RMD, you'll face that 25% penalty—though you can request a waiver if you can show it was a reasonable error and you're taking corrective action.

Actionable takeaway: Before you turn 73, consolidate your old 401(k)s into a single traditional IRA. This simplifies your RMD calculations and reduces the chance of missing a withdrawal. Just make sure you understand the tax implications of rolling over after-tax contributions if you have them.

The "Still Working" Exception: A Lifeline for Late-Career Professionals

Here's a rule that doesn't get enough attention: If you're still working at age 73 and you participate in your employer's 401(k) plan, you don't have to take RMDs from that specific plan until you retire. This is called the "still working" exception, and it's a powerful tool for delaying taxes.

But it only applies to the plan at your current employer. If you have an old 401(k) from a previous job or a traditional IRA, those accounts are still subject to RMDs starting at 73. You can't use the still-working exception to shield your entire retirement portfolio—only the money in your current employer's plan.

For example, let's say you're 74, still working as a consultant, and your current employer's 401(k) has $300,000. You also have a traditional IRA with $200,000 from a rollover. You don't have to take RMDs from the 401(k) until you retire, but you must start taking RMDs from the IRA now.

Practical tip: If you're 70 or older and plan to keep working past 73, consider rolling your old 401(k) into your current employer's plan. That way, you can delay RMDs on that money too—as long as your current plan allows incoming rollovers and the still-working exception applies.

What About Inherited IRAs? The 10-Year Rule Explained

The SECURE Act of 2019 changed the rules for inherited IRAs dramatically. If you inherit a retirement account from someone who died after December 31, 2019, and you're not an eligible designated beneficiary (spouse, minor child, disabled person, or someone less than 10 years younger), you must empty the account within 10 years. There's no annual RMD requirement during those 10 years—just a hard deadline at the end.

This creates a planning challenge. If you inherit a $500,000 IRA at age 45, you have until December 31 of the year that marks the 10th anniversary of the original owner's death to withdraw all the money. You could take nothing for nine years and then withdraw the entire amount in year 10, but that would likely push you into the highest tax bracket.

The IRS issued final regulations in 2026 clarifying that if the original owner had already started taking RMDs, the beneficiary must continue taking annual RMDs during the 10-year period. This adds another layer of complexity. If you're inheriting an IRA, consult a tax professional before making any moves.

Actionable takeaway: If you're the beneficiary of an inherited IRA, don't wait until year 10 to start withdrawing. Spread the distributions evenly over the 10 years to minimize your tax hit. A $500,000 IRA withdrawn over 10 years adds $50,000 to your taxable income annually—manageable for most people.

Strategies to Reduce Your RMD Tax Burden

Nobody likes paying taxes, especially when you've already saved diligently for decades. Fortunately, there are legal ways to reduce your RMDs and keep more of your money. The most common strategy is Qualified Charitable Distributions (QCDs).

Once you turn 70½, you can donate up to $105,000 (as of 2026) directly from your IRA to a qualified charity. This counts toward your RMD for the year, but the donated amount is not included in your taxable income. It's a win-win: You satisfy your RMD requirement, support a cause you care about, and avoid paying income tax on that money.

Another strategy is Roth conversions. By converting some of your traditional IRA to a Roth IRA before you turn 73, you reduce the balance subject to RMDs. Yes, you'll pay income tax on the converted amount in the year of conversion, but you might be in a lower tax bracket before RMDs start. Once the money is in a Roth, it grows tax-free forever.

Practical tip: Start doing Roth conversions in your 60s or early 70s, when your income is lower. Convert just enough to stay within your current tax bracket. For example, if you're in the 22% bracket and have $20,000 of headroom before hitting the 24% bracket, convert exactly $20,000 each year.

What Happens If You Miss an RMD? Don't Panic, But Act Fast

Life happens. You might forget to take your RMD, or your brokerage might not send you a reminder. If you miss the December 31 deadline, the IRS will assess a penalty of 25% of the amount you should have withdrawn. That's a massive hit.

But there's a silver lining: If you correct the error within two years and file Form 5329 with the IRS, you can ask for the penalty to be reduced to 10%. The IRS has been known to waive the penalty entirely if you can show it was a reasonable mistake—like a serious illness or a natural disaster.

The key is to act immediately. As soon as you realize you missed an RMD, withdraw the required amount and file the paperwork. The longer you wait, the harder it becomes to get the penalty reduced. And don't assume your tax software will catch the error—it won't.

Actionable takeaway: Set up automatic RMD distributions from your retirement accounts. Most brokerages offer this service for free. You choose the amount (based on their calculation) and the date (say, November 15 each year), and the money gets deposited into your bank account automatically. No forgetting, no penalty.

The Bottom Line: RMDs Are Manageable With a Little Planning

Required Minimum Distributions aren't designed to punish you—they're the IRS's way of collecting taxes on money that has grown tax-deferred for decades. The government gave you a break on taxes while you saved, and now they want their share. Fair or not, it's the law.

The key takeaway is this: Don't ignore your RMDs, but don't fear them either. With a bit of planning—consolidating accounts, starting Roth conversions early, using QCDs, and setting up automatic withdrawals—you can manage your RMDs without stress. The worst thing you can do is nothing.

If you're within five years of turning 73, now is the time to start talking to a financial advisor or tax professional. They can help you create a withdrawal strategy that minimizes taxes and maximizes what you keep. Because after a lifetime of saving, you deserve to enjoy your retirement—not worry about IRS penalties.