Two retirement accounts can hold nearly identical investments and still be governed by opposite rules once their owner reaches their seventies. A traditional IRA or 401(k) eventually forces money out on the government’s schedule, whether the owner needs it or not, and a missed withdrawal carries one of the steeper penalties in the tax code. A Roth IRA does the reverse: it never requires the original owner to take out a dollar during their lifetime. For older savers deciding where to keep their money, that contrast shapes how long a nest egg can keep growing untouched.
The Roth exception during a lifetime
A Roth IRA is unusual because it lets money sit and compound with no mandatory withdrawals for as long as the original owner lives. There is no age at which the account holder must start drawing it down, no annual minimum to calculate, and no penalty for leaving the balance entirely alone. A retiree who does not need the funds can let a Roth keep growing tax-free into their eighties or nineties, or leave it untouched for heirs.
The Internal Revenue Service states the rule plainly. In its required minimum distribution guidance, the agency notes that Roth IRAs do not require withdrawals until after the death of the owner. That single exception is one of the defining advantages of the account type, and it is a major reason some savers convert traditional balances to Roth accounts before their seventies. The trade-off is timing, because Roth contributions and conversions are made with money that has already been taxed, which is precisely why the account escapes the later mandatory-withdrawal machinery.
The exception covers the original owner only. Once a Roth IRA passes to a beneficiary, distribution rules do apply to the inherited account, so the freedom from required withdrawals is a feature of the owner’s lifetime rather than of the account forever. Details on how the account’s contributions and distributions are treated sit on the IRS Roth IRA page.
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What traditional accounts demand at 73
Traditional retirement accounts work on the opposite principle. Because the money went in untaxed and grew untaxed, the government eventually insists on collecting. Required minimum distributions are the mechanism. Starting at age 73 under current law, the owner of a traditional IRA or a workplace plan such as a 401(k) must withdraw a minimum amount each year, calculated from the account balance and a life-expectancy factor. The first withdrawal can be delayed until April 1 of the year after turning 73, but doing so stacks two distributions into one tax year.
The amount is neither optional nor trivial. Each year’s minimum is figured by dividing the prior year-end balance by a factor from the IRS life-expectancy tables, and the required share of the account rises with age. The rules, tables, and deadlines are laid out in the IRS overview of required minimum distributions. A retiree with several traditional accounts generally must calculate the figure for each, though multiple IRAs can be aggregated for the actual withdrawal.
The penalty for a missed withdrawal
Skipping a required distribution is where the real pain lands. The tax on a missed distribution is an excise tax of 25 percent of the amount that should have been withdrawn but was not, one of the harshest penalties an ordinary retiree is likely to encounter. On a $20,000 shortfall, that is a $5,000 charge on top of the income tax still owed once the money is finally taken.
The SECURE 2.0 Act, passed at the end of 2022, softened that figure from the 50 percent penalty that applied for decades, and it added a correction path. If the account owner takes the missed amount and files the proper paperwork within the correction window the law provides, the penalty drops from 25 percent to 10 percent. That is still a meaningful bite, but it rewards a retiree who catches the mistake quickly rather than letting it stand.
The math catches people off guard because the tax lands on the shortfall, not on the whole account. A retiree who was required to withdraw $18,000 and took only $10,000 owes the excise tax on the $8,000 that stayed put, not on the entire balance. Automating the annual distribution through the account custodian, so the money moves on a set date each year without the owner having to remember, is the simplest guard against a costly lapse, particularly for someone juggling several accounts with different balances.
The 2024 change for Roth 401(k)s
Until recently, the Roth advantage came with an asterisk for workplace plans. A Roth 401(k), unlike a Roth IRA, used to require lifetime distributions even though the money was after-tax, which pushed many savers to roll a Roth 401(k) into a Roth IRA simply to escape the requirement. SECURE 2.0 closed that gap. Beginning in 2024, Roth 401(k) accounts no longer require distributions during the original owner’s lifetime, aligning them with Roth IRAs on this point and removing a longstanding reason to move the money.
Why the difference matters for planning
The gap between the two account types is one of the more consequential in retirement. A traditional account forces taxable income out every year past 73, which can raise a retiree’s tax bracket, increase the share of Social Security that is taxable, and even lift Medicare premiums that are tied to income. A Roth account sidesteps all of that during the owner’s life. Neither is automatically better, since traditional accounts deliver their tax break up front, when a worker is likely in a higher bracket. But the mandatory-withdrawal rules are a large part of why many savers hold both, and why the choice of which account to draw down first deserves deliberate thought rather than default.
The order in which accounts are tapped compounds the effect. Drawing from traditional balances first, or converting some of that money to a Roth during lower-income years, can hold down the size of future required distributions and the taxes they drag along. Leaving a Roth for last lets its tax-free growth run as long as possible, and because the account carries no lifetime withdrawal schedule, nothing forces a retiree’s hand before then. That flexibility, the freedom to leave the money alone until it is genuinely needed, is exactly what the absence of required distributions is meant to provide.
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This article was researched and drafted with AI assistance and reviewed against the linked primary sources.
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.
