US retirees face IRS penalties of up to 25% if they do not start taking required minimum distributions (RMDs) from their pretax investment accounts at age 73. The first RMD must be taken by 1st April of the year after turning 73, with subsequent withdrawals due by 31st December each year. If you do not withdraw the full RMD by the annual deadline, the IRS imposes a penalty amounting to 25% of the amount that should have been withdrawn.
RMDs are calculated based on your account balance, your age, and an IRS life expectancy factor. The year-end RMD deadline also applies to heirs, such as non-spouse beneficiaries. For example, adult children who have inherited IRAs must begin annual withdrawals in 2025 if the original IRA owner reached RMD age before passing away. Since 2020, certain heirs are required to deplete inherited IRAs within 10 years.
