What Happens When You Forget to Take an RMDSubmitted by Mission Financial Planning on August 9th, 2016
Updated for the new SECURE Act: For any individual born after June 30, 1949, the required beginning date for Required Minimum Distributions (RMDs) is April 1 of the year after the year in which such individual reaches age 72 (or, in the case of certain plans, if he or she is still working, after the year in which he or she retires if later). Previously, the trigger age was 70½.
COVID-19 UPDATE: As of 3/28/2020, RMDs can be suspended for 2020 for those who prefer to leave that money invested.
It is particularly important to make your Required Minimum Distributions (RMDs) on time; failure to take RMDs on time can result in a 50% excise tax on the shortfall. In all years except the first year, you must make your RMD by December 31st.
A few years ago, while reviewing a new client’s tax returns, we discovered that she had missed making her RMDs. This was a significant shortfall, and could have resulted in a very expensive tax. We encouraged the client to immediately correct the error by taking the RMD, filing IRS form 5329 , and requesting a waiver from the IRS. The client received approval to waive the "excess accumulations" tax.
Morningstar reports anecdotal evidence of waivers being granted for serious illness, mental incapacity, and financial-institution error.
Other posts in the RMD series cover:
- RMD Basics
- Thinking About RMDs Before You Turn 70
- How RMDs Work In Real Life
- Special Situations – exceptions to the rules
- Making Charitable Donations with your RMD
- Roth IRAs and RMDs
- RMD Strategies
- What Happens When You Forget an RMD
- RMDs for Business Owners and Employees