--- title: Many Retirees Are Making This $1.7 Billion Mistake With Their IRAs description: Vanguard finds nearly 7% of retirees forget required RMDs, triggering $1.7B in tax penalties annually. Avoid costly mistakes now. authors: - name: Adam Hardy role: Lead Data Reporter url: https://money.com/author/adam-hardy/ bio: Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. Adam’s work has also appeared in Business Insider, Forbes, Nasdaq, The Penny Hoarder, Yahoo! Finance and more than a dozen local and regional newspapers. education: University of South Florida, BA, Magazine Journalism at_money_since: 2021 articles: 498 covers: - Retirement - Banking - Business - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Pets - Professional Services - Shopping - Taxes - Technology also_seen_in: - The Penny Hoarder - Forbes Advisor - Creative Loafing - The New York Times - The Washington Post - Bloomberg - Harvard Law School - The Federal Register - National Consumer Law Center - CBS News - Becker's Hospital Review - Business Insider - Mother Jones - The Week - Fortune - The Philadelphia Inquirer - National Association of Student Financial Aid Administrators (NAFSAA) - Education Advisory Board (EAB) - The Institute for College Access & Success (TICAS) - This Morning with Gordon Deal - Empower - Reddit social: - https://www.x.com/hardyjournalism - https://www.linkedin.com/in/hardyjournalism/ editors: - name: Katherine Peach role: Associate Editor url: https://money.com/author/katherine-peach/ bio: Katherine Peach is an associate editor with a focus on news and email at Money. She didn’t always intend to write about money. She’s a classically trained pianist who dreamed of becoming an archaeologist. However, in 2007 Katherine began working in financial publishing as an editor for Agora Inc. (Apparently, unearthing ideas about improving your personal finances isn’t such a bad career alternative!) Katherine’s writing and editing work has been featured in Investing Daily, Clever, Investor Junkie, The Palm Beach Letter, Truth & Plenty, Independence Monthly, NICHE, AmericanStyle, AntiqueWeek, Millennial Money, Money Done Right, TheStreet, Sure Dividend and many others. Katherine holds a Bachelor of Arts in Ancient Studies with concentrations in Archaeology and Ancient Languages and a minor in Literature from the University of Maryland, Baltimore County. She is a member of Phi Beta Kappa. education: University of Maryland, Baltimore County at_money_since: 2025 articles: 14 covers: - Retirement - Banking - Career Advice - Credit - Credit Cards - Debt - Economy and Politics - Education - Federal Reserve Rate Cuts - Health and Wellness - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Shopping - Taxes published: '2025-12-31T18:28:32.000Z' modified: '2025-12-31T18:28:32.000Z' section: Retirement tags: - News word_count: 529 canonical: https://money.com/missed-rmd-penalties/ type: NewsArticle source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Older couple looking over finances](https://img.money.com/2025/12/News-Retirees-Neglect-Required-Minimum-Distributions.jpg) Once retirees turn 73, they must take required minimum distributions, or RMDs, from their retirement savings accounts. If they don’t, the IRS imposes steep tax penalties. But new [research](https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/how-costly-are-missed-rmds.html) from investment firm Vanguard shows that many retirement account holders simply forget to do so. Based on an analysis of the firm’s own IRAs, Vanguard researchers found that nearly 7% of account holders forgot to take an RMD last year. The average missed RMD amount was $11,600, generating tax penalties of up to 25%, or $2,900 each. Applying those figures nationally, Vanguard estimates that 585,000 IRA holders miss their RMDs annually, triggering collective tax penalties of up to $1.7 billion. The firm’s findings also indicate that missed RMDs usually aren’t a one-off occurrence. Retirees who miss an RMD one year are very likely to miss it the next year, too. “Most investors seem to make RMDs a routine,” Andy Reed, head of behavioral economics research at Vanguard, said in the report. “But rather than ‘set and forget,’ many simply 'forget and forget.’” Previous [research](https://www.ebri.org/publications/research-publications/issue-briefs/content/ebri-ira-database-ira-balances-contributions-rollovers-withdrawals-and-asset-allocation-2017-update) from the nonprofit Employee Benefits Research Institute found that between 15% and 18% of IRA holders failed to take RMDs in 2017. IRAs aren’t the only accounts subject to mandatory distributions, either. Traditional employer-sponsored plans like 401(k)s and 403(b)s are, too (while Roth accounts are not). Employer-sponsdered plans weren’t included in Vanguard’s analysis, suggesting that collective tax penalties for missed RMDs likely amount to billions of dollars each year. ***Extra Money:** [See how you can get up to $1,000 in stock when you fund a new active SoFi Invest account](https://money.com/pr/u3ef79664b8e)* ## What to do if you missed a required distribution The Vanguard report says that RMDs are “mandatory in theory but voluntary in practice.” That leaves room for error — and potentially a big tax bill — because the distributions aren’t automated by default. The convoluted distribution rules don’t help, either. RMDs are required annually for retirees who turn 73. The first [RMD deadline](https://money.com/hidden-tax-trap-for-retirees/) is April 1 of the year following your 73rd birthday. For instance, if you turned 73 in 2024, your RMD deadline would have been April 1, 2025. Every year after that, the RMD deadline is on Dec. 31. (Accurately [calculating the amount](https://www.irs.gov/publications/p590b) you’re required to withdraw is a separate can of worms.) For missing the deadline, the standard penalty is 25% of the missed RMD amount. However, there are ways to lower it. If the mistake is timely corrected within two years and you file IRS [Form 5329](https://www.irs.gov/forms-pubs/about-form-5329), the penalty can be reduced to 10%. It’s possible the penalty can be fully waived if the missed distribution was “due to reasonable error and that reasonable steps are being taken to remedy the shortfall,” the IRS says. For a complete waiver request, you’ll need to file Form 5239 and send a letter of explanation to the IRS detailing the issue. ***Gold Offer:** [Sign up with American Hartford Gold today and get a free investor kit, plus receive up to $20,000 in free silver on qualifying purchases](https://money.com/pr/u3ef79664b8e)* ```json { "@context": "https://schema.org", "@graph": [ { "@type": "BreadcrumbList", "@id": "https://money.com/missed-rmd-penalties/#breadcrumb", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://money.com" }, { "@type": "ListItem", "position": 2, "name": "Retirement", "item": "https://money.com/retirement/" }, { "@type": "ListItem", "position": 3, "name": "News", "item": "https://money.com/tag/news/" }, { "@type": "ListItem", "position": 4, "name": "Many Retirees Are Making This $1.7 Billion Mistake With Their IRAs" } ] }, { "@type": "WebSite", "@id": "https://money.com/#website", "url": "https://money.com", "name": "Money", "publisher": { "@id": "https://money.com/#organization" } }, { "@type": "WebPage", "@id": "https://money.com/missed-rmd-penalties/#webpage", "url": "https://money.com/missed-rmd-penalties/", "name": "Many Retirees Are Making This $1.7 Billion Mistake With Their IRAs", "isPartOf": { "@id": "https://money.com/#website" }, "datePublished": "2025-12-31T18:28:32.000Z", "mainEntity": { "@id": "https://money.com/missed-rmd-penalties/" }, "inLanguage": "en-US", "breadcrumb": { "@id": "https://money.com/missed-rmd-penalties/#breadcrumb" }, "dateModified": "2025-12-31T18:28:32.000Z" }, { "@type": "NewsArticle", "headline": "Many Retirees Are Making This $1.7 Billion Mistake With Their IRAs", "articleSection": "Retirement", "image": [ { "@type": "ImageObject", "url": "https://img.money.com/2025/12/News-Retirees-Neglect-Required-Minimum-Distributions.jpg", "width": 2880, "height": 1920, "caption": "News-Retirees-Neglect-Required-Minimum-Distributions" } ], "author": [ { "@type": "Person", "name": "Adam Hardy", "url": "https://money.com/author/adam-hardy/", "@id": "https://money.com/author/adam-hardy/#author", "description": "Adam Hardy is a lead data journalist at Money, where he frequently reports on financial barriers that affect low-income Americans. 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