Chapter 4 - Avoiding Penalties

Take RMDs Properly to Avoid Excise Tax

One important reason to take a Required Minimum Distribution on-time is to potentially avoid extra paperwork and penalties from the IRS. These penalties, which are actually called an excise tax, can be as much as 50% of the amount that should have withdrawn by the deadline date.  

Beneficiaries Must Take RMDs

An excise tax can apply even after an account owner’s death. If you are a beneficiary of a retirement account, meaning you inherited the account, and the original owner did not take their RMD on time, the estate may be responsible for paying the penalty, resulting in less money for the beneficiary.

How to Avoid Penalties – Stay Informed

Keeping up with RMD rules can be a challenge, especially when they change over time. Mistakes like this are usually unintentional, and it is the responsibility of the account owner to make sure they take their RMDs. Working with a retirement advisor who is knowledgeable about the requirements, is one way to stay on top of important due dates. You can learn more by visiting the IRS website and reviewing Form 590-B.

The Importance of an Advisor

Financial advisors help remind you of the necessary steps and answer the questions that come up along the way. Contact us for guidance with RMDs, and together we can build a plan that helps to meet your financial goals.

Contact us For Help with RMDs

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