What happens if I do not make my required minimum distribution?

If an individual fails to take their required minimum distribution, or RMD, from their retirement plan, there can be significant repercussions. The Internal Revenue Service imposes strict rules regarding RMDs, which are mandatory withdrawals that must be taken from certain retirement accounts after reaching a specific age, typically seventy-two years old. When an individual does not withdraw the minimum required amount, the IRS may impose a hefty penalty. This penalty amounts to fifty percent of the amount that should have been withdrawn but was not. For instance, if the RMD amount was ten thousand dollars and the individual did not take it, they could be liable for a five thousand dollar penalty. Besides the penalties, failing to take the RMD can result in a larger tax burden in future years, as the remaining funds in the account continue to grow without being taxed. Taxation on those funds will occur when they are eventually withdrawn, often at a higher amount. To avoid these penalties and ensure compliance, it is crucial for individuals to stay informed about their RMD status and withdrawal requirements. For more specific guidance or to find detailed information about RMDs, individuals may wish to consult the current resources available on the JPMorgan Retirement Plan Services website.