An RMD is the amount you must withdraw from certain retirement accounts every year after a specific age. Per the IRS, RMD rules apply to account holders and beneficiaries of 401(K)s, 403(B)s, traditional IRAs, SEP IRAs, profit-sharing plans and others.
The age change is part of the federal spending package President Joe Biden signed just before the new year. Several retirement provisions were included in the bill called the SECURE 2.0 Act.
The RMD age adjustment is actually an extension of a change from the first SECURE Act, which in 2019 raised the age for RMDs from 70 1/2 to 72. In addition to raising the age for 2023 to 73, the SECURE 2.0 Act also set up a future change to 75 in 2033.
RMDs generally have to be taken by April 1 the year after you reach the set age, with another withdrawal required by Dec. 31. The exact amount of an RMD depends on your own financial situation and calculations that are way beyond me. The withdrawal typically gets included in your income for each year on your taxes.
Failing to take an RMD comes with monetary consequences, however the SECURE 2.0 Act changed that too. The penalty for not taking an RMD went from a 50% tax on the amount you didn’t withdraw to 25%. And it’s only 10% if you withdrawal the appropriate amount by the end of the second year.