What Penalty Applies If You Miss an RMD?
Required minimum distributions are one of the few retirement rules that flip the usual pattern: instead of penalizing withdrawals, the government penalizes not withdrawing enough.
The short answer
A required minimum distribution, or RMD, is the minimum amount someone must withdraw each year from certain retirement accounts once they reach a specific age set by the government. Missing an RMD, or withdrawing less than the required amount, can trigger an excise tax penalty on the shortfall — the difference between what should have been withdrawn and what actually was. The exact percentage and rules are set by federal law and have changed over time, so the specifics depend on current regulations rather than being fixed permanently.
Why RMDs exist in the first place
Tax-deferred retirement accounts, like a traditional IRA or a traditional 401(k), allow money to grow without annual taxation, with taxes generally due when funds are withdrawn. Without a requirement to eventually withdraw, that tax-deferred growth could theoretically continue indefinitely, which isn’t how these accounts were designed to work. RMD rules exist to make sure tax-deferred money eventually gets withdrawn, and taxed, during the account owner’s lifetime or within a defined period afterward. Accounts funded with after-tax dollars, such as a Roth IRA, generally aren’t subject to RMDs during the original owner’s lifetime, which is one structural difference worth knowing about when comparing account types.
How the penalty is calculated
If the required amount isn’t withdrawn by the applicable deadline, the shortfall — not the entire account balance, and not even the entire distribution — can be subject to an excise tax. The penalty applies specifically to the portion that should have been distributed but wasn’t, so someone who withdraws most, but not all, of their required amount would generally only face a penalty on the remaining gap. Because the applicable percentage and rules have been adjusted by legislation in the past, it’s worth confirming the current rate directly rather than relying on older information.
What can reduce or eliminate the penalty
The rules generally allow for the penalty to be reduced or waived under certain circumstances, particularly if the shortfall is corrected within a defined window and the account owner can show the mistake was due to reasonable error with steps taken to fix it. This typically involves withdrawing the missed amount as soon as the error is discovered and following a specific process to request a waiver, rather than simply hoping the mistake goes unnoticed. Because these procedures involve the account custodian and tax filings, and because the rules can be technical, this is an area where the details of a specific situation matter more than general guidance.
Common ways RMDs get missed
A few patterns show up repeatedly:
- Multiple accounts, one combined calculation. Some account types allow the total RMD across similar accounts to be satisfied from just one of them, and confusion about which accounts can be combined this way can lead to an incomplete withdrawal.
- A first-year deadline that differs from later years. The deadline for an account owner’s very first RMD sometimes falls later than the deadlines in subsequent years, which can create confusion if someone assumes the same date applies every year.
- Inherited accounts with different rules. Beneficiaries who inherit a retirement account are often subject to their own distribution requirements, separate from the rules that applied to the original owner, and missing this distinction is a common source of errors.
The takeaway
RMDs are one of the more mechanical, deadline-driven parts of retirement account management, which makes them easy to overlook until a penalty notice arrives. They sit alongside other age-based rules governing early withdrawals as part of the broader framework that shapes when retirement money can, or must, come out of an account. Because the calculation, the applicable age, and the correction process are all governed by rules that can change, checking current guidance for a specific account situation is generally more useful than relying on a rule of thumb.