An RMD Deadline is Approaching Quickly – And Missing It Could Cost You Big Bucks

If you're age 72 or older, take your required minimum distribution now to avoid a big penalty or a double-dip next year.

alarm clock and a post-it note with "deadline" written on it
(Image credit: Getty Images)

There's still time to beat the RMD deadline and withdraw your required minimum distribution from your traditional IRA, 401(k) or other retirement account (except a Roth IRA) for 2022…but you better hurry! The due date for taking this year's RMD is December 31 for most seniors who are at least 72 years old. That's just a few weeks away!

And if you don't take enough out of your retirement plans this year, you could be hit with a 50% penalty from the IRS on the amount not distributed as required. That's a big penalty that you certainly want to avoid.

More Time Allowed to Take Your RMD?

Some people have more time to take their 2022 RMD. For example, if you turned 72 in 2022, you actually have until April 1, 2023, to take your first RMD. (Use our handy RMD calculator to determine when you have to take your first RMD.) You don't have to wait until April 1, but it's an option.

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If you're still working and don't own at least 5% of the company, you can also delay taking RMDs from your current employer's 401(k) plan until April 1 of the year after the year you retire. Again, it's your choice.

If you delay your first RMD to April 1, you'll have to take two RMDs in 2023, which could trigger unintended consequences that increase your tax bill. For example, two RMDs in one year might kick you into a higher tax bracket or affect the amount of Social Security benefits that are subject to tax. One the other hand, if you had a lot of income in 2022, it might make sense to delay your first RMD to avoid similar problems this year. It all depends on your circumstances.

Calculating Your RMD

Generally, the minimum amount you're required to withdraw in 2022 is calculated by dividing the account balance at the end of 2021 by a life expectancy factor that the IRS publishes in Publication 590-B (opens in new tab). (Again, we've created an easy-to-use tool that computes RMDs from traditional IRAs for you.) Fortunately, thanks to changes to the life expectancy tables, most seniors will have smaller RMDs for 2022 when compared to previous years.

If you have more than one traditional IRA, you need to determine a separate RMD for each IRA, but you can add up the RMD amounts and take the total from any one or more of your IRAs. However, if you have multiple 401(k) accounts, you have to calculate and take the RMD from each plan separately. (Your 401(k) plan sponsor or administrator should calculate the RMD for you.)

Waiver of RMD Penalty

You may be able to avoid the 50% penalty tax. You can request a waiver if your failure to take the RMD is due to a reasonable error and take whatever steps are necessary to increase your distribution to the required level. To request a waiver, submit Form 5329 (opens in new tab) with a statement explaining the error and the steps you're taking make things right.

Steps to Take Now

If you haven't withdrawn the necessary funds yet from any retirement account, don't delay. Contact the financial institution administering your account right away and set up a distribution (you might want to take out a little extra for your RMD to take care of estimated tax payments).

Most large financial institutions allow you to set up an RMD online. Some companies will even process an RMD automatically if they don't receive a completed form or online request before the deadline (so you aren't hit with a penalty). However, at this time of year, the most important thing is that you get the ball rolling now!

Rocky Mengle
Senior Tax Editor, Kiplinger.com

Rocky is a Senior Tax Editor for Kiplinger with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, he worked for Wolters Kluwer Tax & Accounting and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky has a law degree from the University of Connecticut and a B.A. in History from Salisbury University.