If you turned 73 this year, or you’ve been pulling money out of a traditional IRA or 401(k) for a while now, December 31 matters more than any other date on your calendar. That’s the deadline for your required minimum distribution, the withdrawal the IRS requires once you hit that age, and treating it like a soft suggestion is how people end up owing money they didn’t need to.
Come up short on that withdrawal, even by a little, and the IRS applies a federal excise tax equal to 25% of the amount you should have taken out but didn’t. Owe $20,000 and withdraw nothing, and the penalty alone runs $5,000, stacked on top of the regular income tax you’ll eventually pay when the money does come out.
The rule itself isn’t complicated. What trips people up is the timing: custodians get backed up in December, paperwork takes longer than expected, and by the time someone notices the withdrawal didn’t process, the calendar has already flipped to January.
Waiting until the last week of December to deal with this is how otherwise careful people end up paying a penalty they never had to pay.
Who actually owes a withdrawal by December 31
Required minimum distributions kick in at age 73 for traditional IRA, SEP IRA, and SIMPLE IRA owners, and the same age applies to most workplace retirement plans. The one exception is your very first RMD: you’re allowed to delay it until April 1 of the following year instead of taking it by December 31 of the year you turn 73.
That exception sounds generous until you work out what happens in year two. If you push your first RMD into the following spring, your second RMD is still due by December 31 of that same year, which means two taxable withdrawals land on one tax return. Most financial advisors tell clients to just take the first one by December 31 in the year they turn 73 and skip the double withdrawal altogether.
Everyone past their first RMD year, meaning anyone who already turned 73 in a previous year, has exactly one deadline: December 31, no exceptions, no grace period. If you’re still working and your 401(k) or 403(b) is with your current employer, and you own less than 5% of the business, you can usually delay RMDs from that specific plan until you actually retire. That delay doesn’t apply to IRAs, and it doesn’t apply to old 401(k)s sitting with a former employer.
What missing it actually costs you
The penalty for missing a required minimum distribution is an excise tax on the shortfall, not on the whole account. If your RMD for the year is $18,000 and you withdraw $18,000, nothing happens beyond the ordinary income tax on the withdrawal. If you withdraw nothing at all, the IRS can charge 25% of that $18,000, or $4,500, as a separate tax on top of what you’ll eventually owe when the money does come out.
That 25% rate is already a cut from where it used to be. Before 2023, the penalty sat at 50% of the missed amount, so an $18,000 shortfall could have cost $9,000 in penalties alone under the old rule.
The tax applies per account and per year, and it stacks if you miss more than one RMD cycle. Someone who skips withdrawals from the same IRA for two years running doesn’t just owe one penalty, they owe it twice, once for each year’s shortfall, calculated separately. The IRS finds out about missed RMDs through the 1099-R forms your custodian already files every year, matched against the required amount for your age and account balance, so this isn’t the kind of thing that quietly disappears if you don’t mention it on your return.
How to shrink the penalty if you already slipped
If you’ve already missed a required minimum distribution, the first move is to withdraw the missed amount as soon as you catch the error, not to wait for the following tax season. The IRS gives you what it calls a correction window, generally running through the end of the second year after the year you missed, and fixing the shortfall inside that window cuts the excise tax from 25% down to 10%.
You report the shortfall and the reduced tax on Form 5329, filed with your tax return for the year the RMD was due, even if you’re filing it late or amending a return you already sent in. The form has a section specifically for requesting a waiver of the tax entirely, which the IRS can grant if you can show the shortfall happened because of a reasonable error and that you’re taking steps to fix it.
A reasonable error, in practice, covers things like a custodian miscalculating the amount, a new account you didn’t realize had RMD requirements, or a genuine mixup between accounts. It doesn’t cover simply forgetting, though plenty of people write a short letter explaining exactly that and still get the penalty waived, since the IRS has historically been willing to forgive a first-time miss once the money is actually withdrawn.
The charity move that satisfies the deadline without a tax bill
If you’re 70 and a half or older, you can send money directly from your IRA to a qualified charity instead of withdrawing it yourself, and that transfer, called a qualified charitable distribution, counts toward your required minimum distribution without ever showing up as taxable income. For 2026, you can move up to $111,000 this way, up from $108,000 in 2025, and a married couple with separate IRAs can each use their own limit for a combined $222,000.
Say your RMD for the year is $20,000 and you send $20,000 straight to a charity through this method. The entire RMD is satisfied, none of it lands on your tax return as income, and you still get the benefit of the giving without having to itemize to see it. The transfer has to go directly from the IRA custodian to the charity. Writing yourself a check and donating the cash afterward doesn’t count, and it gets taxed as a normal withdrawal.
There’s also a one-time option most people have never heard of: a qualified charitable distribution of up to $55,000 can fund a charitable gift annuity or charitable remainder trust, once in your lifetime, separate from the annual limit above. For anyone who gives to charity anyway and is staring down a December 31 deadline, this is usually the cleanest way to make the withdrawal disappear from taxable income entirely.
How to make sure the money actually moves in time
December is the worst month to start a required minimum distribution, because it’s also the busiest month for custodians processing exactly this kind of request from everyone else who waited. Start the withdrawal in November if you can, and confirm with your custodian that the transaction has settled, not just that you submitted the request, since a pending transfer that doesn’t clear by December 31 still counts as a missed deadline.
If your IRA holds stock or funds you don’t want to sell at year-end prices, you can usually take the RMD as an in-kind transfer instead of cash, moving the shares themselves into a taxable brokerage account. The IRS still counts this as satisfying the distribution, based on the value of the shares on the day they move, and you avoid being forced to sell in a down market just to meet the deadline.
One more detail that catches people off guard: if you have more than one IRA, you can calculate the RMD for each one separately but withdraw the total from just one of them. That rule doesn’t carry over to 401(k)s or other workplace plans, where each plan’s RMD has to come out of that specific plan. Mixing up those two rules is one of the more common ways people accidentally come up short.
Getting this right doesn’t take a financial advisor, just a few minutes before the calendar runs out. Confirm the withdrawal cleared, then get back to the parts of retirement that are supposed to be enjoyable.
