Tax-deferred retirement accounts come with a bill that eventually comes due. The government lets savers postpone taxes on traditional IRAs and 401(k)s for decades, but not forever: at a set age, the IRS requires annual withdrawals — required minimum distributions — and taxes them as income. A 2022 law reshaped the timeline, lifting the starting age and handing savers additional years of tax-deferred growth before the mandatory drawdown begins. Knowing exactly when the clock starts, and what it costs to ignore it, has become a central retirement-planning question.
The two step-ups: 73 today, 75 in 2033
Before 2020 the required distributions began at 70½. The original SECURE Act moved that to 72, and the SECURE 2.0 Act of 2022 pushed it again — to 73 for those who reach that age in 2023 through 2032, and to 75 starting in 2033. In practice, savers born from 1951 through 1959 begin at 73, while those born in 1960 or later wait until 75. The higher age is not a one-time delay but a permanent shift in when the drawdown starts.
The rules reach most tax-deferred workplace and individual accounts — traditional IRAs, SEP and SIMPLE IRAs, and 401(k), 403(b) and 457(b) plans. Roth IRAs are exempt during the owner’s lifetime. One narrow exception lets some still-working employees delay distributions from their current employer’s plan past the trigger age if they do not own 5 percent or more of the company. Inherited retirement accounts follow their own separate distribution rules and can require withdrawals regardless of the beneficiary’s age.
The first withdrawal carries a timing quirk worth planning around. A saver can delay that initial distribution until April 1 of the year after turning 73, but doing so forces two taxable withdrawals into the same calendar year — the delayed first one and the on-time second — which can inflate that year’s income. Every distribution after the first must be taken by December 31.
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How the required amount is figured, and why it can raise a tax bill
The required withdrawal is not a flat percentage. Each year’s amount equals the account’s prior-year-end balance divided by a life-expectancy factor from an IRS table, so the fraction that must come out rises as a person ages. A retiree in their 70s might be required to withdraw under 4 percent of the balance; by their 90s the required share climbs well past 10 percent, whether or not the money is needed for living expenses.
Savers with more than one account face a wrinkle in how the withdrawal is taken. Multiple IRAs can be aggregated and the total pulled from any one of them, but 401(k) accounts must each distribute their own required amount separately, a distinction that trips up retirees who assume one withdrawal covers everything. Married savers cannot combine their distributions either; each spouse calculates and takes withdrawals from their own accounts.
Because those dollars land as ordinary income, a large required distribution can do more than trigger income tax. It can push a retiree into a higher bracket, raise the share of Social Security that is taxable, and lift income past the thresholds that add the Medicare high-income premium surcharge known as IRMAA two years later. For savers with sizable balances, the RMD is often the single biggest driver of their retirement tax bill.
There is a charitable route that can satisfy the requirement without the tax hit. A qualified charitable distribution lets those 70½ and older send IRA money directly to an eligible charity, counting toward the required amount while keeping it out of taxable income entirely — one of the few ways to meet the mandate without inflating adjusted gross income, and by extension the Social Security and IRMAA calculations that ride on it.
The penalty for missing one — smaller than it was, still costly
Skipping a required distribution once carried one of the harshest penalties in the tax code: a 50 percent excise tax on the amount that should have been withdrawn. SECURE 2.0 cut that to 25 percent, and to 10 percent if the shortfall is corrected within a short window — a meaningful reduction but still a steep price for an oversight. The correction generally requires filing IRS Form 5329 and taking the missed amount as soon as the error is found.
The same law removed required distributions from Roth 401(k)s during the owner’s lifetime, aligning them with Roth IRAs, which have never had them. The higher starting age also widens a planning window that savers increasingly use: the low-income years between leaving work and the first RMD are prime time to convert traditional balances to Roth accounts, paying tax at today’s rates to shrink the mandatory withdrawals — and the tax bills — that would otherwise arrive at 73 or 75. For a well-funded retiree, in other words, the RMD age is less a deadline to meet than a countdown to plan against.
This article was researched and drafted with the assistance of artificial intelligence.
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