Are You Making These Common RMD Mistakes? The Truth About the New 73 vs. 75 Deadlines

Let’s be real for a second: the IRS loves to change the rules just when you finally feel like you’ve figured them out. It’s like playing a game of musical chairs, but instead of losing a seat, you lose twenty-five percent of your retirement account to penalties.

If you’re approaching that “golden age” where the government starts knocking on your door demanding you take money out of your retirement accounts, you’ve probably heard the term RMD (Required Minimum Distribution). But lately, the conversation around RMDs has become a confusing mess of numbers. Is it 70? 72? 73? 75?

If you’re feeling a bit like a deer in headlights, don’t worry. I’m Angelique Solomon, and at Solomon Estate and Wealth Planning, we specialize in making the “scary” financial stuff feel like a walk in the park. Today, we’re breaking down the RMD age shift and why missing these deadlines is a mistake you literally cannot afford to make.

The Great RMD Identity Crisis: Are You a 73 or a 75?

The SECURE Act 2.0 (gotta love those government names, right?) basically moved the goalposts for when you have to start taking money out of your tax-deferred accounts like your 401(k) or Traditional IRA.

Here is the “Cheat Sheet” version so you don’t have to call your CPA just to find out your age:

• If you were born between 1951 and 1959: Your RMD age is 73.
• If you were born in 1960 or later: Your RMD age is 75.

Why does this matter? Because if you’re sitting on a mountain of cash in a 401(k) from a previous employer and you think you have until 75, but you were actually born in 1958… well, you’re about to have a very awkward conversation with the tax man.

Understanding the 401k rollover rules is the first step to making sure you aren’t blindsided by these dates.

The Penalty: A 25% “Oops” Tax

I mentioned a 25% penalty earlier, and I wasn’t joking. It used to be a staggering 50%, which was basically the IRS’s way of saying, “Give us half your lunch money because you forgot the deadline.”

While they “lowered” it to 25%, that’s still a massive chunk of change. If your required distribution was $20,000 and you missed it, you’re looking at a $5,000 penalty. That’s a Mediterranean cruise or a very nice down payment on a grandkid’s car, gone, just like that.

If you catch the mistake early (usually within two years), you might be able to get that penalty reduced to 10%, but why play that game? The best way to avoid the penalty is to have a plan in place long before you hit the deadline.

Mistake #1: The “April 1st” Deferral Trap

The IRS gives you a little “grace period” for your very first RMD. You can actually wait until April 1st of the year after you turn 73 (or 75).

Don’t do it.

Here’s why: If you wait until April 1st of year two to take your first RMD, you still have to take your second RMD by December 31st of that same year.

That means you’re taking two distributions in one tax year.

This is a classic tax nightmare. Doubling up on your RMDs can easily push you into a higher tax bracket, trigger higher Medicare premiums (the dreaded IRMAA surcharges), and make more of your Social Security benefits taxable. It’s a domino effect that can cost you thousands of dollars in unnecessary taxes.

Mistake #2: Ignoring 401(k) Rollover Options

One of the biggest reasons people miss their RMDs or mess them up is because they have money scattered everywhere. You’ve got a 401(k) from the job you left ten years ago, a Traditional IRA from a bank that merged three times, and maybe some random stocks.

Each account has its own RMD rules. For example, if you have multiple IRAs, you can total up the RMDs and take the whole amount from just one of them. But if you have multiple 401(k)s? You usually have to take a separate RMD from each one.

This is where an IRA rollover from a 401k becomes your best friend. By consolidating those old employer plans into a single IRA, you simplify your life. You have one number to calculate, one deadline to meet, and one check to receive.

If you’re looking for 401k rollover options, you might consider moving that money into an IRA or even an annuity.

The “Set It and Forget It” Strategy: Annuity Rollovers

If the thought of calculating life expectancy tables every year makes you want to take a nap, you’re not alone. This is why many of our clients at Solomon Estate and Wealth Planning look into annuity vs. IRA rollover options.

An annuity can be structured to provide a lifetime income, guaranteed by the contract and subject to the claims-paying ability of the issuing insurance company, that satisfies your RMD requirements automatically. You don’t have to worry about the math, the deadlines, or the 25% penalty. The money just shows up in your bank account, and the IRS stays happy. Plus, it gives you that peace of mind knowing your income is designed to last.

Don’t Forget the “C” in QCD

If you’re over 70½ (yes, that age still matters!), you can perform a Qualified Charitable Distribution (QCD).

Even though you don’t have to take an RMD until 73 or 75, you can start giving money directly from your IRA to a 501(c)(3) charity starting at 70½. The best part? That money never hits your tax return as income. Once you do hit RMD age, your QCDs actually count toward satisfying your required distribution.

It’s a “win-win-win”: You help a cause you love, you satisfy the IRS, and you keep your taxable income lower.

Final Thoughts: Don’t Wait Until You’re 73

The biggest mistake you can make with RMDs isn’t the math: it’s the timing. If you wait until you’re 73 to start thinking about this, you’ve missed years of tax-planning opportunities.

Whether it’s a retirement planning session to look at your current 401(k) or just a quick chat about your estate planning goals, we’re here to help.

Don’t let the IRS dictate your retirement. Take control of the calendar, understand the age gaps, and let’s make sure that 25% penalty never sees a dime of your money.

Stay savvy, Angelique Solomon

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Annuities are subject to the claims-paying ability of the issuing insurance company and may include surrender charges and fees. Neither Solomon Estate and Wealth Planning nor its advisors provide tax or legal advice.