If you have a traditional IRA, 401k, or any tax-deferred retirement account — and you are 73 or older — missing one IRS deadline will cost you 25% of everything you should have withdrawn.
According to Vanguard research, nearly 7% of traditional IRA investors miss their Required Minimum Distribution every year. The total cost to American seniors exceeds $1.7 billion annually — paid in penalties, not taxes.
A Required Minimum Distribution is the minimum amount the IRS requires you to withdraw from your tax-deferred retirement accounts each year. The IRS created RMDs to ensure tax-deferred money is eventually taxed.
Under the SECURE 2.0 Act:
If you miss your RMD deadline, the IRS charges a 25% excise tax on the amount not withdrawn. This drops to 10% if corrected within 2 years by filing Form 5329.
Formula: Account Balance ÷ IRS Life Expectancy Factor = RMD
Example: $100,000 balance ÷ 22.0 (age 78 factor) = $4,545 RMD
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