For decades the government let retirement savings grow untouched only up to a point, then demanded a share back through required minimum distributions. Recent law pushed that starting line to age 73, giving savers extra years of tax deferral, but it also preserved a penalty that ranks among the harshest in the tax code for anyone who forgets. The combination of a later start, an easy-to-miss first deadline, and a penalty that can be sharply reduced if caught quickly makes the timing of that first withdrawal one of the more consequential dates on a retiree’s calendar.
The age that keeps moving
The required beginning age is not fixed history; it has been climbing. It sat at 70 and a half for years, moved to 72, and now stands at 73 for savers who reached that milestone under the current rules. According to the IRS, account owners must generally begin taking RMDs at age 73 from traditional IRAs and most workplace plans, with a further scheduled increase to 75 in 2033.
The rising age is a genuine gift of deferral. Every additional year before withdrawals are forced is another year the full balance can compound without a mandatory taxable draw. But the deferral is not permanent, and the later start compresses the government’s collection window, which is part of why the amounts required each year, calculated from IRS life-expectancy tables, tend to rise as a retiree ages.
One notable carve-out narrows who has to worry at all. Roth IRAs never required distributions during the owner’s lifetime, and the rules were changed so that Roth balances inside workplace plans no longer force lifetime withdrawals either. That leaves traditional, pretax accounts as the main targets of the mandate, which is logical because those are the dollars on which tax has never been paid.
A separate carve-out can delay the start for those still on the job. An employee who keeps working past 73 and does not own more than 5 percent of the company sponsoring the plan may generally postpone distributions from that current employer’s plan until the year of retirement, a timing rule spelled out in the IRS guidance on pension and annuity income and the required beginning date. The reprieve is narrow: it reaches only the active employer’s plan, while traditional IRAs and any old workplace accounts must still begin distributions on schedule.
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The first-year deadline trap
The first required distribution comes with a quirk that trips up even careful savers. While RMDs are normally due by December 31 each year, the very first one can be delayed to April 1 of the year after the owner turns 73. That extra grace period sounds helpful, but delaying the first RMD forces two distributions into the same calendar year, because the second year’s withdrawal is still due by that December 31.
Two taxable withdrawals landing in one year can inflate income enough to spill into a higher tax bracket, raise the taxable portion of Social Security benefits, or push a retiree past the thresholds that increase Medicare premiums. The April 1 option is a deadline, not a recommendation, and taking the first RMD in the year of turning 73 instead often produces a smoother tax picture. The choice is one of the few genuinely strategic decisions in the RMD system.
The math behind each year’s amount is mechanical but unforgiving. The IRS divides the prior year-end balance by a life-expectancy factor, and the account owner is responsible for withdrawing at least that sum. Custodians often calculate the figure, but the legal duty to actually take it rests with the individual, which is precisely where costly oversights happen.
The penalty, and the discount for fixing it fast
Missing an RMD once carried one of the steepest penalties in the tax code, a 50 percent excise tax on the amount that should have been withdrawn. Recent law cut that in half, but a 25 percent charge on a skipped distribution is still severe. On a required withdrawal of $20,000, forgetting entirely means a $5,000 penalty on top of the ordinary income tax eventually owed on the money.
What softens the blow is a correction window most retirees never hear about. The penalty drops to 10 percent for account owners who take the missed distribution and file the required form within a two-year correction period. Acting quickly to withdraw the overlooked amount and report it can turn a $5,000 mistake into a $2,000 one, and in some cases the IRS waives the penalty entirely when the shortfall was due to reasonable error and is being corrected.
Claiming that relief has its own procedure. A retiree who misses a distribution reports the shortfall on Form 5329, the return for additional taxes on qualified plans, and to request a waiver attaches a short reasonable-cause statement explaining the error and the steps taken to fix it. When the account owner has already withdrawn the overlooked amount and shows the lapse was an honest mistake rather than avoidance, the agency routinely grants the waiver, which is why a caught-and-corrected miss often costs nothing beyond the ordinary tax.
That structure rewards vigilance over panic. The worst outcome belongs to the saver who never notices the miss and never fixes it; the far better outcome belongs to the one who catches it, withdraws the amount, and files the paperwork inside the window. The real risk in the RMD system is not the arithmetic of any single year but the silent lapse, an account left untouched by an owner who assumed the custodian would handle a deadline that the law placed on them.
This article was produced with AI assistance and reviewed against primary sources by The Money Overview editorial team.
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