12 Common RMD Mistakes and How to Protect Yourself
Once you reach age 73, the law requires you to take distributions from your traditional IRAs, 401(k)'s, defined benefit plans, and most other types of retirement accounts, except for Roth accounts. If you don't take out the required minimum distribution (RMD), you will incur an excise tax of 25% of the amount you were supposed to withdraw. The penalty drops to 10% if you correct the mistake within two years or before having the tax assessed by the IRS if sooner.
Unfortunately, mistakes are rampant — and they're easy to make. To project yourself from RMD penalties, you need to understand how to calculate your minimum withdrawals and how to avoid these 12 common errors.
Key takeaways
- You must take withdrawals from your retirement account once you turn 73 years old.
- The IRS can assess excise tax plus penalties if you don't withdraw the minimum amount.
- To protect yourself, make sure you understand the rules about RMDs.
1. Not knowing your RMD start age
You must start taking RMDs after you turn 73. Prior to 2020, the age was 70.5 years. It's set to increase to 75 years in 2033, based on the terms of the SECURE 2.0 Act.
Don't expect a reminder – the IRS will not remind you when it's time to start taking RMDs, and your plan administrator may not remind you either.
2. Misunderstanding the exception for employees
If you're still working at your RMD start age, you don't have to take RMDs from your employer-sponsored retirement plan – unless you own at least 5% of the company. Instead, you can wait until you retire.
However, you do have to take RMDs from your IRAs or any other retirement accounts that are not tied to that employer. If you fail to take these distributions, you will incur the 25% excise tax, even though you're still employed.
3. Missing the deadline for RMDs
Your first RMD deadline is April 1st, and all subsequent deadlines are on December 31st.
The year after you turn 73 years (or retire as noted above), you must withdraw your RMD by April 1 of the following year, and you should base your distribution on your account value on December 31st of the year before you turned 73 (or retired, if applicable). Then, by the following December 31st, you must take an RMD based on your account value on the last day of the previous year.
For example, say that Susan is retired and she turned 73 on June 1st, 2025. She must take her first RMD by April 1, 2026, based on her retirement account balance on December 31, 2024. Then, she must take a second RMD on December 31, 2026, based on her retirement account value on December 31, 2025. All future RMDs must be taken by December 31st based on the value of the accounts on the previous December 31st.
| RMD | Deadline | Based on Account Value on |
|---|---|---|
| First RMD | April 1, 2026 | December 31, 2024 |
| Second RMD | December 31, 2026 | December 31, 2025 |
| All Future RMDs | December 31, 20XX | December 31 of the prior year |
4. Miscalculating the required minimum withdrawal
Your account custodian can help you calculate the RMDs, but unfortunately, mistakes happen, and plan administrators are not always correct. To ensure that you're working with the right numbers, you may want to consult with a certified public accountant (CPA). You can also calculate your own RMDs using the IRS's tables. The table you should use depends on your marital status, the age difference between you and your spouse, and whether or not you inherited the account.
- Uniform Lifetime Table – Used by unmarried IRA owners, married owners whose spouses are within 10 years of their ages, and married owners whose spouses aren't the sole beneficiary of their accounts.
- Table 1 (Single Life Expectancy) – Used by beneficiaries who inherited an IRA from someone who was not their spouse.
- Table II (Joint Life and Last Survivor Expectancy) – Used by owners who are more than 10 years older than their spouses if their spouses are the sole beneficiary of the account.
Of course, if you have multiple accounts, you must do extra calculations to determine your RMD. If you have both inherited accounts and accounts that you started, you may need to use multiple tables to calculate your RMDs.
5. Not understanding the rules for multiple retirement accounts
If you have multiple accounts, you must calculate the RMD separately for each account. You must take RMDs from each 401(k), but for IRAs, you can take an aggregate withdrawal from any of your IRAs to cover the required distribution.
For example, if you have three IRAs and the RMD across all three accounts is a total of $20,000, you can take that full amount from any IRA that you select, or you can split up the distribution however you want across the three accounts.
In contrast, if you have two 401(k)'s, you must take an RMD from each of them. You cannot just take the full amount from one of the accounts.
Often, retirees have a mix of IRA and employer-sponsored retirement accounts, and it's critical that you understand how to calculate the RMDs across multiple types of accounts.
6. Combining RMDs with spouse's account(s)
Retirement accounts are individually owned, and married couples must keep this in mind when calculating their RMDs. Make sure that you calculate your RMDs and your spouse's RMDs separately. Any withdrawals you make from your account do not count toward the RMD on your spouse's account, and vice versa.
7. Not planning for market fluctuations
Your RMD is based on the balance in your retirement account(s) on the last day of the previous year. The RMD is a specific percentage of your account based on the IRS's life expectancy tables listed above. However, if market fluctuations cause your account to fall in value, you may be forced to withdraw more than you wanted to.
First, be aware that even if your account value falls during the tax year, you still must take out an RMD based on the previous year's value. Second, to protect yourself against market fluctuations, you may want to put your funds into less volatile investments – for example, a lot of people shift from stock-heavy to bond-heavy portfolios during retirement.
8. Misclassifying a Roth conversion as an RMD
You can move money from a Traditional IRA to a Roth, but if you do so, that does not cover your RMD for the year. That can get confusing because the money you take out of your IRA and put into the Roth is taxed as income. However, it still doesn't count toward your RMD.
Misunderstanding this rule can lead to extremely high penalties — especially if you don't uncover your error until after the correction window.
9. Not knowing about Qualified Charitable Distributions (QCD)
Don't want to take RMDs because your income is too high? Then, consider making a charitable donation from your retirement account. You can direct the plan administrator to make a QCD to a charity of your choice. The QCD counts toward your RMD, but it's not considered to be taxable income.
As of 2025, you can make QCDs of up to $108,000. The donation is tax-deductible and not subject to income limits like most charitable donations — generally, you can only claim a deduction for charitable donations worth up to 50% of your income, and even lower in some cases.
10. Getting confused about inherited IRAs
The rules around inherited IRAs can be quite complicated. In most cases, if the original account owner was required to take RMDs, the beneficiary must withdraw the original account holder's RMD from the account the year of their death. Then, most (not all) beneficiaries must withdraw the remaining funds in the account within 10 years.
Taxpayers who are the sole beneficiaries of their spouse's IRAs are subject to different rules, and they have additional options. Consult with a tax attorney if you inherit an IRA. Ideally, you should also consult with an estate or tax attorney before you pass to ensure that you have optimized the tax situation for your beneficiaries.
11. Not knowing the rules about Roth retirement accounts
You are not subject to RMDs for Roth IRAs. Additionally, as of 2024, Roth 401(k)s are no longer subject to RMD requirements- that change was passed with the SECURE 2.0 Act. As noted above, it's also critical to understand how Roth conversions affect your RMDs.
12. Missing the 60-day window on IRA rollovers
Making this mistake won't necessarily subject you to excise taxes for not taking RMDs from your required accounts, but it can lead to an unwanted tax liability. When you take funds out of an IRA, you have 60 days to put them into another qualifying retirement account. If you miss the deadline, the withdrawal counts as taxable income, and if you put the funds into a retirement account after this deadline, you may face an excise tax for overcontributing to a tax-advantaged account.
Additionally, you don't get a 60-day window for all withdrawals. For example, if you inherit an IRA, you cannot do a rollover like this – you can only do a rollover that's handled by the account administrator. In other words, the administrator can take the funds out of the inherited IRA and transfer them directly to another retirement account. If they send you a check for the withdrawal, you can't roll it over.
What Happens If You Make an RMD Mistake?
If you make an RMD mistake, you can report the error on your tax return, using Form 5359. This form also helps you calculate the excise tax due based on the withdrawal that you didn't take. There are lines to calculate a 25% excise tax and lines to calculate a 10% excise tax, which applies in situations where you make the withdrawal after the original deadline but during the correction window.
You can also note your request to waive the tax by noting "RC" and the amount you want abated in parentheses on this form. Then, attach a letter explaining why the IRS should abate the tax.
If you don't file Form 5359, the IRS may spot the mistake first. In that case, the IRS will send you a Notice of Deficiency or a letter telling you that they have assessed the tax. Once this happens, the correction window closes, and you are subject to the full 25% penalty.
However, in all cases, you can request to have the IRS abate the excise tax if you had reasonable cause (RC) for not making the required withdrawal. Although this is a request for tax abatement, it's often casually referred to as RMD penalty abatement. You can request abatement when filing Form 5359 and by writing a letter to the IRS.
Even if you've paid the tax (penalty) already, you can still request an abatement. However, you generally must do so within two years of the payment, or you won't be able to get a refund.
Get Help With RMDs and Other Tax Problems Now
To avoid excise taxes for not making RMDs or to get help with RMD penalties, consult with a tax pro. You may also want to reach out to your plan administrators for guidance on RMD calculations. Also, set up alerts so that you don't forget to take your withdrawals by the deadline – even taking them a day late will subject you to these penalties.
To find help now, use TaxCure to find a qualified tax professional in your area. Here are some tips on how to use the site to find help.