Americans who turned 73 in 2025 face a hard deadline that did not exist two years ago: they must pull money from traditional IRAs and workplace retirement plans or hand the IRS a quarter of the amount they failed to withdraw. The required minimum distribution age shifted from 72 to 73 under the Consolidated Appropriations Act, 2023, signed into law as Public Law 117-328. That two-year extension gave older savers extra time to let balances grow, but it also raised the stakes for anyone who misses the withdrawal window.
Why the shift to age 73 creates larger penalty exposure
The IRS requires account holders to begin taking required minimum distributions for the first year they reach age 73. For that initial year, the required beginning date is April 1 of the following year. Every subsequent distribution must be completed by December 31. Anyone who misses the mark owes an excise tax equal to 25% of the shortfall, the amount that should have been withdrawn but was not.
The penalty math gets worse the longer balances sit untouched. Because the RMD onset moved from 72 to 73, retirees gain an additional year of tax-deferred growth before withdrawals begin. Bigger balances produce bigger required distributions, which in turn produce bigger penalties when those distributions are skipped. The hypothesis that this delay will show up as measurably higher year-end account balances among 73-year-olds is straightforward: an extra year of compounding in a rising market lifts the denominator from which the IRS calculates each annual withdrawal. Whether that pattern appears in aggregate data will depend on future IRS Statistics of Income releases, which have not yet covered the post-shift period.
IRS tables and the correction window that cuts the tax
Each year’s distribution amount is not a flat percentage. The IRS calculates it using life-expectancy tables published in Publication 590-B. The account balance as of December 31 of the prior year is divided by a distribution period tied to the owner’s age. As an account holder ages, the distribution period shrinks, forcing a larger share of the balance out each year.
One relief valve exists for people who miss a deadline. The 25% excise tax drops to 10% if the shortfall is corrected within two years, according to IRS guidance and regulatory text codified at 26 CFR 54.4974-1. That correction requires actually taking the missed distribution and filing the appropriate excise tax form. The reduced rate is not automatic; it rewards prompt action, not good intentions.
The legislative vehicle behind the age change, H.R. 2617 of the 117th Congress, bundled the retirement provision into a broader spending package. A further increase to age 75 is scheduled for 2033 under the same law, which means the penalty calculus will shift again within the decade. Future cohorts will enjoy even longer tax deferral, but the size of missed distributions-and the associated excise tax-will likely climb as balances accumulate.
Gaps in enforcement data and what account holders should do first
Publicly available data on how often the excise tax is actually assessed remain sparse. IRS Statistics of Income tables break out retirement distributions, but they do not yet isolate how many taxpayers pay the penalty tied to missed RMDs after the age shift. Without that detail, it is hard to know whether the higher age and higher balances are translating into more enforcement or simply more voluntary compliance.
That uncertainty does not change the basic steps for people approaching 73. The first task is to identify every account subject to the rules: traditional IRAs, SEP and SIMPLE IRAs, and most employer plans such as 401(k)s. Roth IRAs owned by the original contributor are not subject to lifetime RMDs, but inherited Roth accounts can be, depending on the relationship to the deceased and the timing of the inheritance.
Next, account holders or their advisors must calculate the required amount for each year. The IRS explains the mechanics in its RMD frequently asked questions, which walk through how to use prior-year balances and the correct distribution period. Many custodians will provide an annual RMD figure as a convenience, but the legal responsibility to withdraw the right amount rests with the account owner, not the financial institution.
Coordination matters when multiple accounts are involved. For traditional IRAs, owners can aggregate the total RMD and pull it from one or several IRA accounts in any combination, so long as the total meets or exceeds the required amount. Employer plans such as 401(k)s are generally different: each plan typically requires its own separate distribution. Failing to understand those distinctions is one way savers inadvertently create a shortfall.
For those who discover a missed or incomplete distribution, the two-year correction window becomes crucial. Taking the late withdrawal as soon as the error is found, documenting the circumstances, and filing the excise tax form can reduce the bite from 25% to 10%. Tax professionals can help determine whether additional relief is available based on reasonable error and timely correction, but waiting only narrows the available options.
The move to age 73 gives retirees more flexibility in the early years of retirement, yet it also concentrates risk for anyone who loses track of the calendar. Until the IRS publishes more granular enforcement data, the safest assumption is that the rules will be applied as written. Savers nearing their early seventies-and the advisors who serve them-have strong incentives to treat RMD planning as a recurring, non-negotiable task rather than an afterthought discovered when penalties are already in play.
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.
