The Retirement Deadline You Can’t Afford To Miss Before December 31

If you're required to withdraw money from an IRA or 401(k), missing the deadline can trigger a 25% IRS excise tax — but only on the amount you failed to withdraw, not your entire account. The penalty drops to 10% if the amount is repaid within two years. So a $10,000 shortfall, for example, could mean a $2,500 tax, reduced to $1,000 if corrected within the permitted window. Even a careful retirement plan can run into trouble when one transaction happens too late.

A deadline on paper and a deadline at your brokerage aren't necessarily the same thing. Most required minimum distributions (RMDs) for 2026 must be completed by December 31, apart from the special first-year exception. Account providers can face heavy year-end requests, and trades, checks, and transfers may need processing time. Waiting until New Year's Eve to place the request could potentially leave you with an unexpected tax bill.

Here's what to check now, rather than during the final days of December.

The December 31 cutoff isn't the day to start asking

The IRS calculates an RMD using the retirement account's balance from the previous December 31 divided by a life expectancy factor, so this year's number depends on last year's closing balance.

Some custodians may offer automatic withdrawals, but an automated amount may not reflect changes at another institution or all the accounts you own. For traditional IRAs, you can generally combine required amounts and withdraw the total from one IRA; separate 401(k) plans usually must each satisfy their own requirement. Ask your custodian for its last processing date, allow extra time if investments must be sold first, and verify that the full amount actually leaves the account before year-end.

First-time withdrawals can create a two-RMD tax surprise

RMDs generally start at age 73 for people born from 1951 through 1959; those born in 1960 or later start at 75, according to IRS regulations. Your first RMD may be delayed until April 1 of the following year, while certain workplace plans may allow employees to postpone withdrawals until retirement (if they continue working past their RMD age).

The catch is that you must still take that next year's RMD by December 31, potentially putting two taxable withdrawals into one calendar year. For example, someone turning 73 in 2026, for example, could take their first RMD by April 1, 2027, but would also owe a separate 2027 distribution by December 31, according to IRS guidance.

An IRA charitable gift may satisfy the withdrawal tax-free

If you're 70½ or older and don't need your RMD for living expenses, a qualified charitable distribution (QCD) can send money directly from your IRA to an eligible charity. The IRS raised the annual QCD exclusion ceiling to $111,000 per person for 2026, and eligible gifts count toward that year's RMD without being included in taxable income.

This can have an advantage beyond your tax bracket: Medicare's income-related monthly adjustment amounts (IRMAAs), additional premiums which may apply if your income exceeds a certain threshold, generally use tax information from two years earlier. So, a smaller adjusted gross income (AGI) might mean smaller surcharges later. Tell the IRA custodian to send the money directly to the charity and ask about year-end deadlines; withdrawing it yourself and then donating won't qualify as a QCD.

Bunching gifts can help clear a new charitable deduction floor

Separate from QCDs, retirees who itemize may benefit from combining several years of ordinary charitable gifts into a single tax year.

Starting in 2026, the IRS allows itemizers to deduct charitable contributions only to the extent they exceed 0.5% of AGI. For example, at $100,000 of income, that's a $500 threshold. Bunching donations can mean crossing that floor in one year rather than losing part of the deduction to it every year, assuming itemizing makes sense.

However, this isn't an additional deduction for a QCD: Money excluded from income through a QCD cannot also be claimed as a charitable deduction.

Bottom line

The 25% tax targets an RMD shortfall, not your account balance, and the deadline can be harder to meet than it looks. Have you confirmed both your 2026 amount and your custodian's final processing date? Taking these steps early may help lower your financial stress and avoid a preventable penalty.

Beyond meeting the deadline, it's worth reviewing how RMDs fit into your broader retirement income strategy. If you don't need the money for everyday expenses, you can generally reinvest the proceeds in a taxable brokerage account after making the required withdrawal. That way, you can satisfy IRS rules while keeping your savings working toward your long-term financial goals.

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