Overview
- Traditional IRAs and 401(k)s offer pre-tax contributions and tax-deferred growth, with taxes due when you withdraw in retirement.
- Required minimum distributions begin at age 73 or 75 depending on birth year, and skipping them can result in a 25% IRS penalty on the amount not withdrawn.
- Vanguard reports that almost 7% of its IRA holders missed an RMD in 2024, with an average required withdrawal of $11,600.
- A missed $11,600 distribution could face a $2,900 penalty, and a missed $10,000 RMD could cost $2,500 under current rules.
- Most RMDs are due by December 31 each year, though the first can be delayed until April 1 of the year after turning 73, and many institutions allow automatic monthly, quarterly, or annual withdrawals.