For those who are 73 and older – the IRS requires you take a minimum distribution from your retirement account. There are some exceptions – but for the most part… the IRS has allowed the money to grow tax-deferred and now they want you to take monies out and pay some taxes. If you don’t – there is a stiff 50% excise tax. What can you do if you miss your RMD?

During the Covid pandemic – the Senate approved a few measures that gave relief to many Americans. One such measure suspended RMDs in 2020. That gave accounts more time to recover. If you were confused and didn’t take the RMD in 2021 – you were still subject to the penalties

If you forget to take the RMD, your first choice is to just pay the penalty – which is called an ‘excise tax’. It’s a 50% tax on any dollars not distributed from the account during the year it’s required. You’ll need to report that in your tax return and need to file an extra form.

In many situations – the IRS allows for a waiver. If you think that you missed the deadline because of a reasonable cause… you file a waiver and ask that the excise tax be renounced. If you request a waiver – do not pay the excess accumulation penalty up front. It’s advised that you wait and follow instructions – then you will be notified if the waiver is granted.

Missing the RMD is a big deal, and very expensive. Work with your IRA custodian to set up a periodic distribution. This would automatically trigger to make distributions monthly, quarterly or anytime during the year.

Most investors who don’t need the money paid out monthly, will take the RMD later in the year. That way the assets in the account have the chance to grow over the course of the year. No one can predict how the markets will behave – but history shows us, that investments in the broad stock market -like the S&P 500 generally are up about 76% of the time. So, odds are in your favor to let them stay invested until the end of the year.