For years, retirement savings in a traditional IRA or 401(k) grow without a tax bill. That grace period ends at a specific age, when the government requires account owners to start pulling money out and paying tax on it. The rule is called a required minimum distribution, and the trigger age has moved in recent years. Getting the timing wrong is one of the most expensive mistakes a retiree can make, because the penalty for a missed withdrawal is steep.
The starting age is now 73, not 70½ or 72
Under the SECURE 2.0 law, required minimum distributions from traditional retirement accounts now begin at age 73, according to the IRS. That is a change from the old thresholds many savers still remember: the starting age was 70½ for years, moved to 72, and then to 73. It is scheduled to rise again to 75 in 2033. The shifting numbers are part of why some retirees miscalculate — the age that applied to a parent or an older sibling may no longer apply to them.
The rule covers traditional IRAs and workplace plans such as 401(k)s and 403(b)s. Roth IRAs are treated differently and do not require distributions during the original owner’s lifetime, and a recent change also removed lifetime required distributions from Roth accounts inside workplace plans. Someone still working past 73 may be able to delay distributions from their current employer’s plan until they retire, though that exception does not apply to IRAs or to plans left behind at former employers.
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The first withdrawal can wait until April 1, but the delay has a cost
There is one built-in grace period. The IRS allows the very first required distribution to be delayed until April 1 of the year after the account owner turns 73. Someone who reaches 73 in 2026 could wait until April 1, 2027, to take that first withdrawal.
The catch is that the second required distribution is still due by December 31 of that same later year. Anyone who postpones the first one ends up taking two taxable withdrawals in a single calendar year, which can push more income into a higher bracket, raise the taxable share of Social Security benefits, and increase Medicare premiums through the income-related surcharge. For many retirees, simply taking the first distribution in the year they turn 73 avoids that pileup.
The penalty for missing one is 25% of what should have come out
The reason the deadline matters so much is the penalty attached to it. If a required distribution is not taken in full by the deadline, the IRS imposes an excise tax of 25% of the amount that should have been withdrawn but wasn’t. On a required distribution of $20,000 that a retiree forgot to take, that is a $5,000 penalty — separate from the ordinary income tax still owed on the money once it does come out.
The penalty was 50% under the old law, so 25% is an improvement, but it remains one of the harshest routine penalties in the tax code. It applies to the shortfall, so taking out too little counts as a miss just as much as taking out nothing.
Fixing a missed withdrawal quickly cuts the penalty to 10%
SECURE 2.0 added a second break for people who act fast. If the missed distribution is corrected within a two-year correction window — the account owner withdraws the missed amount and files the proper form — the penalty drops from 25% to 10%. Correcting the error promptly and attaching an explanation can, in many cases, lead the IRS to waive the penalty entirely for a reasonable mistake. The key is not to ignore it; a missed distribution left unaddressed is far more expensive than one caught and fixed.
How the amount is figured, and why account owners should check the math
The required amount is not a flat percentage. It is calculated each year by dividing the account’s balance as of December 31 of the prior year by a life-expectancy factor from IRS tables. As the factor shrinks with age, the required percentage rises, so the withdrawals grow larger later in retirement. Custodians will often calculate the figure, but the legal responsibility to take the correct amount rests with the account owner.
Someone with several traditional IRAs can total the required amounts and take the combined sum from any one of them, but 401(k)-type accounts generally must each satisfy their own requirement separately. Because the rules differ by account type and the penalty for a slip is so large, retirees juggling multiple accounts benefit from confirming the numbers each year rather than assuming the paperwork handles itself. A calendar reminder in the fall leaves time to act before the December 31 deadline.
There are ways to soften the tax hit of these mandatory withdrawals. A retiree who is charitably inclined can direct part or all of a required distribution straight to a qualified charity through a qualified charitable distribution, which counts toward the requirement while keeping the money out of taxable income. Others use the lower-income years before 73 to convert some traditional savings to a Roth, shrinking the future balance that distributions will be calculated on. Both strategies take planning ahead of the deadline, but they can meaningfully reduce the lifetime tax bill on money that must eventually come out.
This article was researched and drafted with the assistance of AI and reviewed by The Financial Wire editorial team.
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David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
