Missed Your RMD? You May Still Be Able to Avoid a Penalty.
- - Missed Your RMD? You May Still Be Able to Avoid a Penalty.
Maurie Backman, The Motley FoolFebruary 8, 2026 at 9:22 AM
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Key Points -
Failing to take a required minimum distribution (RMD) typically results in a 25% penalty.
If you correct the mistake within two years, you can generally get that penalty knocked down to 10%.
In some cases, you may be able to get out of the penalty completely.
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There's a huge benefit to saving for retirement in a traditional individual retirement account (IRA) or 401(k). These retirement accounts allow you to contribute money on a pre-tax basis, thereby shielding some of your earnings from the IRS.
Plus, unlike regular brokerage accounts, IRAs and 401(k)s don't force you to pay taxes on gains every year. Rather, investment gains are tax-deferred, and you pay taxes when you take withdrawals.
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But there's a downside to having your savings in a traditional retirement plan: You face required minimum distributions (RMDs) when you're older. RMDs kick in at 73 or 75, depending on your year of birth. And there can be steep penalties for failing to take them.
If you missed a recent RMD, you should know that you may be looking at losing 25% of the sum you didn't remove from your retirement account. But there may be a way to get that penalty reduced -- or even wiped out completely.
Act quickly to minimize the pain
RMD penalties can add up quickly if you have a large account balance. If you fail to take a $1,000 RMD, you're looking at a $250 penalty. If you fail to take a $20,000 RMD, your penalty could be $5,000.
That's why it's so important to take your RMDs on time. They're due every year by Dec. 31, though you're able to defer your first RMD to April 1 of the year following your 73rd birthday.
If you already missed an RMD, act quickly. If you're able to correct that mistake within two years, you can get your 25% penalty reduced to 10%. But there may also be a way to get your penalty erased completely.
If you can show the IRS that your failure to take your RMD was due to a "reasonable error" and that you're taking steps to fix the situation, you may get that penalty waived. "Reasonable errors" could include things like falling ill or miscalculating your RMD and therefore not taking it in full.
How to correct an RMD mistake
If you didn't take your RMD on time, you'll need to file Form 5329 with the IRS. On that form, you'll be able to include an explanation of the reasonable error that caused you to miss your RMD.
Of course, an even better idea is to take steps to ensure that you don't miss future RMDs. To that end, set up calendar reminders so you don't forget to withdraw funds from your retirement savings.
You can also see whether your retirement accounts allow you to set up RMDs to be withdrawn from your savings automatically. That could truly be the best way to avoid a repeat scenario.
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