For millions of older Americans, the retirement accounts they spent decades building eventually come with a catch: at a certain age, the government stops letting the money sit untouched. These required minimum distributions force a yearly withdrawal from traditional retirement accounts, and the current starting age is 73. Miss one, and the penalty can be steep enough to erase a chunk of the very savings the account was meant to protect.
When the withdrawals have to start
The rule applies to traditional IRAs and most workplace plans such as 401(k) and 403(b) accounts, where contributions were made before tax. The Internal Revenue Service sets the required beginning age at 73 for people born between 1951 and 1959. Under the SECURE 2.0 law, that threshold climbs again to 75 for anyone born in 1960 or later, a change that takes effect in 2033. Roth IRAs are treated differently and do not force withdrawals during the original owner’s lifetime.
The first distribution has a small timing wrinkle. A person reaching 73 can delay that very first withdrawal until April 1 of the following year, but doing so stacks two required distributions into a single tax year, which can inflate that year’s taxable income. Every year after, the deadline is December 31.
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How the penalty for a missed distribution works
The cost of forgetting is what makes this rule bite. If an account owner fails to withdraw the full required amount by the deadline, the shortfall can be hit with an excise tax. The IRS sets that penalty at 25 percent of the amount that should have come out but did not. On a missed distribution of several thousand dollars, that is a serious sum handed over for nothing more than an oversight.
There is a meaningful escape hatch. If the mistake is caught and the missed amount is withdrawn within the correction window, the penalty drops from 25 percent to 10 percent. Filing the proper form and taking the overdue distribution promptly is what triggers the lower rate, so acting fast after noticing an error genuinely cuts the damage in half and then some.
Why the rule got a little friendlier
The 25 percent figure, harsh as it sounds, is actually an improvement. For decades the penalty for a missed required distribution was 50 percent of the shortfall, one of the most punishing levies in the tax code. SECURE 2.0 lowered it to 25 percent, and added the 10 percent option for savers who fix the error quickly. The intent was to make an honest mistake less catastrophic while still keeping pressure on people to take the money and let it be taxed.
That history matters for anyone who missed a distribution under the old regime and assumes the worst. The current, lighter penalty structure is what applies now, and the correction relief gives a real path to reducing it further.
Keeping the deadlines from sneaking up
The distribution amount is not a flat figure. It is recalculated each year by dividing the account’s prior year-end balance by a life-expectancy factor from IRS tables, so it generally rises as a person ages. Many custodians will compute the figure and even automate the withdrawal, but the legal responsibility to take it rests with the account owner, not the brokerage.
Households with several accounts face an added trap, because the rules on combining distributions differ between IRAs and workplace plans. The safest habit is a yearly calendar reminder well before December 31, a check that every required account has been satisfied, and a quick call to the plan custodian when anything is unclear. The withdrawal itself is unavoidable, but the penalty attached to forgetting it is entirely avoidable.
This article was researched and drafted with the assistance of AI and reviewed by The Financial Wire editorial team.
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Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
