economy

December 31, 2025

This year-end mistake costs investors up to $1.7 billion annually

The deadline for RMDs is Dec. 31. Here's how to reduce or eliminate the penalty if you miss the due date.

This year-end mistake costs investors up to $1.7 billion annually

TL;DR

  • Retirees must start Required Minimum Distributions (RMDs) from pretax accounts at age 73.
  • The year-end deadline for RMDs is December 31st.
  • Failure to take the full RMD can trigger an IRS penalty of up to 25% of the undistributed amount.
  • The penalty can be reduced to 10% if corrected within two years and Form 5329 is filed.
  • The IRS may waive the penalty for reasonable errors and prompt correction.
  • Nonspouse beneficiaries with inherited IRAs also have RMD obligations, needing to empty them within 10 years and starting yearly RMDs in 2025 if the original owner reached RMD age.
  • An estimated 6.7% of Vanguard investors at RMD age missed their withdrawals in 2024, with an average RMD of $11,600.
  • Vanguard estimates over 580,000 IRA owners could be skipping RMDs annually, leading to up to $1.7 billion in penalties.

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