Nobody sends a bill for this. Missing it costs a quarter of the shortfall.
In one specific year a retirement account stops being somewhere money goes in and starts being somewhere money must come out. Nothing prompts it, the penalty is a share of what you failed to take, and the first year is the one that catches people.
Updated September 2026, 26 minute read
What changed: 2026-09-05: First published.
Contents (10 sections)
- 1.Nobody sends a bill
- 2.The year it starts, and the two ways to delay it
- 3.The deadline that doubles a year Members only
- 4.How the number is arrived at Members only
- 5.The accounts that pool, and the ones that do not Members only
- 6.What is outside all of this Members only
- 7.The withdrawal that never becomes income Members only
- 8.The penalty, and the way out of most of it Members only
- 9.The one afternoon checklist Members only
- 10.Where these rules come from Members only
Section 1 of 10, about 24 minutes left
Part 1. Nobody sends a bill
For decades a retirement account is a place money goes in. Then, in one specific year, federal law reverses it and money has to start coming out, in a minimum amount, whether or not the household needs it.
The mechanism is a required minimum distribution. What makes it unlike anything else in a tax year is that nothing prompts it. There is no bill, no notice and no due date printed on a statement. A custodian may calculate the figure and may remind you, but the obligation to take it is yours, and so is the consequence of not.
That consequence is unusual too. It is not interest on a late payment. It is an excise tax of 25 percent of the amount that ought to have been withdrawn and was not, which falls to 10 percent if the mistake is put right inside a defined window. A missed withdrawal of $20,000 is a $5,000 penalty on money that was sitting in your own account the whole time.
These are federal tax rules and they apply the same way in every state. What each state then does with the income once it lands in a return is a separate question that varies widely.
This guide is educational information. It is not legal, tax or financial advice.
Part 2. The year it starts, and the two ways to delay it
Federal law fixes a starting point it calls the applicable age.
- For anyone who reached 72 after the end of 2022 and reaches 73 before 2033, the applicable age is 73.
- For anyone who reaches 74 after the end of 2032, it is 75.
Reaching that age does not immediately trigger a deadline. What it triggers is a date the statute calls the required beginning date, which is April 1 of the year following the later of two things: the year you reach the applicable age, or the year you retire.
That second half is the still-working exception, and it is narrower than it sounds:
- It applies to a workplace plan, so a 401(k) at the employer you still work for can wait until you actually stop, but only where that plan provides for it. A plan is permitted to require distributions at the applicable age for everyone, so this is a question to put to the plan rather than an assumption to make.
- It does not apply to an individual retirement account. An IRA starts on schedule whether you are working or not.
- It does not apply to someone who owns 5 percent or more of the business sponsoring the plan.
- It covers the plan of the employer you are still with. Old plans left behind at previous employers are not still-working accounts.
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- The deadline that doubles a year
- How the number is arrived at
- The accounts that pool, and the ones that do not
- What is outside all of this
- The withdrawal that never becomes income
- The penalty, and the way out of most of it
- The one afternoon checklist
- Where these rules come from
About 22 minutes of reading left.
Part 3. The deadline that doubles a year Members only
The first withdrawal may be delayed to April 1. Doing that puts two withdrawals into one tax year, and the bill for that arrives twice.
Part 4. How the number is arrived at Members only
One balance, divided by one factor from one of three tables. The arithmetic is simple and the table choice is where mistakes live.
Part 5. The accounts that pool, and the ones that do not Members only
Two kinds of account let you add the amounts up and take the total from whichever you like. A third kind does not, and it is the common one.
Part 6. What is outside all of this Members only
Roth accounts are exempt while the owner is alive, and that exemption stops at the owner's death.
Part 7. The withdrawal that never becomes income Members only
Money moved straight from an individual retirement account to a charity still counts toward the required amount, and never enters the tax return.
Part 8. The penalty, and the way out of most of it Members only
Twenty five percent of the shortfall, cut to ten if it is corrected inside a window that is longer than people expect.
Part 9. The one afternoon checklist Members only
Most of the work is making a list of accounts. The traps are all in accounts nobody was thinking about.
Part 10. Where these rules come from Members only
The Internal Revenue Code and the tax authority's own published guidance.