Retirement Retirement Planning

The December 31 Retirement Deadline That Could Cost You 25% if You Miss It

If you're over age 73, you need to know about this.

By Catherine Collins , Edited by Laura Hohenstein

Updated Oct. 30, 2026

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There is one important deadline that retirees need to keep in mind once they turn 73, and that is the deadline for taking required minimum distributions (RMDs) from your 401(k) retirement plan. That deadline is December 31, and with the holidays and stress of the upcoming months, it's easy to forget about it.

Here are a few reasons why RMDs are so important and the penalties for missing the deadline.

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Why RMDs are important for retirees to remember

An RMD stands for required minimum distributions. These are mandatory withdrawals that retirees have to make from their 401(k) or traditional IRA in retirement. The amount of your withdrawal depends on a few factors, like your age and portfolio balance. RMDs are important to know about because the IRS requires you to make one by December 31st. If you don't, there can be heavy penalties.

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The age retirees have to take an RMD varies by birth year

The age requirements for RMDs have changed recently. Starting in 2026, RMDs start when you turn 73. Previously, retirees had to start taking RMDs when they turned 72. The RMD age will increase to age 75 in the future if you're born after 1960. Most retirement accounts have this as a requirement, except Roth IRAs and Roth 401(k)s.

The penalties for missing an RMD deadline can be significant

If you forget to take your RMD before December 31st, you'll have to pay a penalty of a 25% excise tax on the amount you should have taken out. So, if you were supposed to take out a $10,000 RMD, the penalty would be $2,500. For retirees who are living on a fixed income, these penalties can negatively impact your cash flow for years to come. There is a correction window, however.

If you correct the mistake before the end of the next taxable year and file Form 5329, the penalty may be reduced to 10%. The IRS can potentially waive the penalty altogether depending on the reason you give for missing the deadline. Consult with a financial planner or tax attorney if you're not sure whether your reason for missing the deadline qualifies for a waiver.

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You can delay your first RMD, but there's a caveat

There is an exception to the RMD deadline, and that's when it comes to taking your very first one. The IRS allows you to delay your first RMD until April 1st of the following year. However, the downside to doing this is that you'll be required to make two distributions the following year. That, in turn, can create more income, pushing you into a higher tax bracket.

So, while delaying your first RMD gives your retirement account time to grow more, it can also create a not-so-welcome surprise tax bill the following year. In addition, earning a higher income can also increase your Medicare premiums.

Not every retirement account requires RMDs

It's worth noting that not every retirement account requires RMDs. If you have a Roth IRA or Roth 401(k), you do not have to take RMDs. In fact, you can leave your investments in your Roth accounts for as long as you like. That's because you've already paid taxes on that income and contributed to the Roth accounts with after-tax money.

Making a qualified charitable distribution can count as an RMD

If you're over age 70.5 and you have a traditional IRA, there is another unique option that can satisfy the RMD requirement. It's called a qualified charitable distribution, or QCD. With this, you can donate a certain amount to charity directly from your IRA. This amount can satisfy some or all of your RMD requirements. The benefit of doing this is that because it's a charitable donation, it doesn't count towards your taxable income. This can help retirees optimize their taxes and make a donation at the same time.

If you need advice, consult a financial advisor

If you're not sure whether or not you're following tax law when it comes to RMDs, consult with a financial advisor. There are specific rules for combining RMDs, depending on the type of retirement account you have, so the guidelines can be confusing at times.

A financial planner can double-check your earnings and portfolio balance as well to make sure you are withdrawing the exact amount required. This can prevent you from having to pay significant penalties or missing the deadline completely.

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Bottom line

Missing an RMD deadline is a financial mistake that carries a high cost. That's why it's important to take care of any year-end checks now, monitor your accounts, and calculate your withdrawal so that you don't get a surprise penalty in the future.

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