The Most Common IRA “Required Minimum Distribution” Mistakes People Make

1. Ignoring the RMD Deadline
   Missing the RMD deadline could result in a hefty 50% tax penalty on the amount that should
   have been withdrawn. The deadline for most retirement accounts is December 31 each year.
   However, for your first RMD, you have until April 1 of the year following.
2. Forgetting to Take the RMD
   It can be surprisingly easy to forget to take your RMD, especially if you have multiple retirement
   accounts and don’t factor in all of them. Again, the penalty for missing an RMD is steep.
3. Incorrectly Calculating the RMD Amount
   Calculating the correct RMD involves using the correct year end account balance(s) and life
   expectancy factor from the right IRS table. There are RMD calculators available online or ask
   your advisor for help in advance.
4. Not Understanding the Different RMD Rules for Different Accounts
   Different types of retirement accounts (regular IRAs, Roth IRAs, inherited IRA, etc.) may have
   different RMD rules. Misunderstanding these distinctions could lead to issues and potential
   financial penalties.
5. Overlooking Beneficiary RMDs
   If you inherit a retirement account these days, you may likely be required to take RMDs,
   depending on your relationship to the deceased and the account type. Understanding the
   beneficiary rules can be essential to avoiding unexpected tax liabilities.
6. Failing to Utilize the QCD Option
   If you are 70 ½ or older, you can avoid taxable income stemming from an IRA distribution and
   satisfy your charitable intentions at the same time by using a qualified charitable distribution
   (QCD). A QCD is a distribution of funds from your IRA directly to a qualified charitable
   organization that can be counted toward satisfying your required minimum distribution (RMD) for
   the year. A QCD excludes the amount donated from your taxable income (unlike regular IRA
   withdrawals). Keeping your taxable income lower may reduce the impact to certain tax credits
   and deductions, including Social Security and Medicare. Also, QCDs don’t require that you
   itemize, which due to the recent tax law changes, means you may decide to take advantage of
   the higher standard deduction, but still use a QCD for charitable giving.
7. Consolidating Savings Too Late
   Consolidating your retirement accounts may help simplify RMD calculations but if you are
   considering consolidation, consider the timing and impact on your overall potential investment
   growth/strategy.
8. Neglecting to Update Your RMD Strategy
   Regularly reviewing and updating your RMD strategy can be important. Changes in tax laws,
   your financial situation, or life expectancy could all potentially impact your RMDs. Staying
   proactive and consulting professional advisors could help ensure your strategy remains optimal
   and compliant with current and future regulations.

NOTE: If you turn age 72 after 2019, your first RMD needs to be by the year you turn age 73.