Required Minimum Distributions at 73: A Decision Guide Before You Withdraw

Required minimum distributions, or RMDs, are one of the first retirement rules that can turn a sensible long-term plan into an urgent tax decision. Once they apply, you must withdraw at least a calculated amount from many tax-deferred retirement accounts even if you do not need the cash for spending. Missing the deadline can trigger a steep excise tax, while taking withdrawals without a plan can unnecessarily increase your tax bill.

For many people, RMDs begin at age 73. The details vary for inherited accounts, employer plans, and people still working, so the first move is to identify which rule applies to you. This guide is a planning framework, not personal tax advice: use it to prepare better questions for your custodian, tax professional, or financial planner.

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Confirm Whether This Is Your First RMD Year

Start with your birth year, account types, and employment status. Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most pre-tax workplace plans are common RMD accounts. Roth IRAs owned by the original account holder generally do not have lifetime RMDs, but inherited Roth accounts can follow different distribution rules. That distinction alone makes an account inventory worthwhile.

For an initial RMD, you may have until April 1 of the year after the year you reach the applicable starting age. But delaying the first withdrawal can create two taxable distributions in the next calendar year: the delayed first RMD plus that year's normal RMD due by December 31. If you expect a lower-income year now than next year, taking the first distribution in the current year may be cleaner. Run both scenarios before defaulting to the later deadline.

If you are still employed, a “still working” exception may allow a delay for the current employer's workplace plan in some circumstances. It does not usually apply to IRAs, and ownership rules can change the answer. Ask the plan administrator specifically whether the exception applies to your account rather than assuming employment postpones every RMD.

Inherited retirement accounts deserve their own review. The beneficiary's relationship to the original owner, the original owner's date of death, and the account type can determine whether annual distributions, a 10-year deadline, or another rule applies. Do not use your personal RMD schedule for an inherited account.

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Calculate the Requirement From the Right December 31 Balance

The basic calculation starts with the prior December 31 account balance divided by a life-expectancy factor from the IRS Uniform Lifetime Table for most owners. Your custodian may calculate or estimate the amount, but you remain responsible for ensuring the total is right. Save the statement showing the prior-year ending balance and any calculation the firm provides.

You generally calculate the RMD separately for each IRA, but you may be able to take the combined IRA requirement from one or more of your IRAs. Workplace-plan RMDs are often calculated and withdrawn separately, which means you should not assume a large IRA withdrawal covers a 401(k) obligation. Account type matters more than the total retirement balance.

Do not forget accounts you rarely use. A former employer's 401(k), SEP IRA from old self-employment income, or small rollover IRA can create an overlooked requirement. Make a one-page list with institution, account type, prior-year balance, calculated RMD, distribution date, and tax withholding election.

Recheck the amount after major account changes, transfers, or a spouse's death. A custodian's estimate is a helpful starting point, not a substitute for coordinating your whole retirement picture. When the numbers are material or accounts are complex, paying for a tax professional to review the calculation is usually cheaper than correcting a missed distribution later.

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Plan the Tax Bill Before You Move the Money

An RMD is generally taxable ordinary income. It can raise your marginal tax rate, affect estimated tax payments, increase Medicare income-related premium adjustments later, or make more of your Social Security benefits taxable. The distribution itself may be mandatory; the timing, withholding, and use of the money are still planning choices.

Project total income before taking the first withdrawal. Include pensions, wages, Social Security, interest, dividends, capital gains, business income, and any planned Roth conversion. Then compare taking the RMD in one payment with spreading it across the year. Multiple distributions do not reduce the annual requirement, but they can make cash flow and withholding easier to manage.

Federal tax withholding from an IRA distribution can be especially useful because withholding is generally treated as paid throughout the year, even if it happens late. That may help someone who underpaid estimated taxes earlier in the year, but it should be coordinated with a tax professional rather than used as a last-minute guess. State withholding rules vary.

RMDs must be taken before a Roth conversion for the same year; you cannot convert the required amount to avoid the distribution. If a conversion remains part of your strategy, calculate the RMD first, remove it, then model how much conversion still fits your tax bracket. Separating those transactions in your records avoids a common and costly mistake.

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Decide What Job the Withdrawn Cash Should Do

Needing to withdraw does not mean needing to spend. Give the RMD a job before it lands in a checking account. If it supports living expenses, schedule it alongside your monthly budget and avoid pulling more investment risk than you need. If you have high-interest debt or an insufficient cash reserve, part of the after-tax proceeds may improve your balance sheet.

If you do not need the income, you can reinvest the after-tax amount in a taxable brokerage account, add it to a savings goal, or use it for planned gifts. The investment allocation should reflect your full portfolio. An RMD from a bond-heavy IRA does not require you to buy the same holding in a taxable account; you can rebalance across accounts while respecting taxes and risk.

Charitably minded IRA owners age 70½ or older may want to ask about a qualified charitable distribution, or QCD. A QCD is not an itemized-deduction strategy; it can send eligible IRA money directly to a qualified charity and may count toward the RMD while excluding that amount from income when done correctly. It has specific limits and paperwork, so arrange it with the custodian before taking a normal distribution.

Avoid letting a large withdrawal sit unplanned in cash for years. The forced distribution is an invitation to update the household plan: spending, taxes, investment allocation, charitable giving, and estate goals should all agree on where the money goes next.

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Put the Deadline and Review on Your Calendar Now

The easiest RMD is one you decide before December. Put two dates on your calendar: an early-year review to confirm the calculated amount and a fall deadline that leaves time to resolve custodial or tax questions. If you prefer monthly withdrawals, set them up after confirming that the annual total will be met. If you prefer one distribution, do it early enough that a processing delay will not create a year-end emergency.

Each year, update your account inventory, beneficiary designations, tax projection, and cash-flow plan. RMDs often reveal that a retirement plan still treats accounts as separate silos. A coordinated review can surface old accounts to consolidate, beneficiaries to update, or future Roth-conversion windows before distributions grow larger.

Keep the paperwork: calculation records, Form 1099-R, withholding confirmations, QCD acknowledgments, and the return that reports the distribution. These records make it easier to answer questions and maintain continuity if a spouse, adult child, accountant, or adviser helps later.

Your action this week is simple: identify every pre-tax retirement account, confirm the first applicable deadline, and request the RMD estimate from each custodian. Once the requirement is visible, you can turn a forced withdrawal into a deliberate tax and cash-flow decision.