Don’t forget your required minimum distribution this holiday season

The end of the year is a busy time, but among the long list of things to do should be taking a required minimum distribution – for those who haven’t already done so, are at least 72 years old and have a retirement account.

Retirement Tip of the Week: If you haven’t yet taken your required minimum distribution, now is the time to get that sorted to avoid a heavy penalty and a headache.

Account holders must begin taking required minimum distributions, or RMDs, at age 72. Investors must make these mandatory withdrawals by Dec. 31 each year. First-time takers have until the following April 1 of the year in which they turn 72 to take their first RMD, but if they do that may have two distributions to take that year – their first RMD as well as the one required each year by end of year.

See: I have questions about my RMDs

The penalty for not taking an RMD is 50% of the amount of money that was required to be taken. If an investor’s RMD was $5,000 for the year, and he took no distribution from his account, the penalty would be $2,500 (half of the amount he was supposed to distribute). If that same investor had taken $3,000 out of the account during the year – but was supposed to take at least $5,000 per the RMD calculation – he would be short $2,000 per the rule, and thus, face a $1,000 penalty (because that’s 50% of what he was left of his RMD).

Read: If you’re over 72 with an IRA, make sure you do this before the year ends

The government weighs a few factors when calculating someone’s required minimum distribution, including their age, the account balance as of Dec. 31 of the prior year and a life expectancy table. Individuals unsure of what they’re required to withdraw should reach out to the firm housing the account, or a financial planner if he or she is a client.

Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column

There are a few exceptions, however. For starters, Roth IRAs don’t have an RMD rule (but Roth 401(k) plans do). Also, beneficiaries of inherited accounts have their own rules to follow depending on if the original accountholder began taking distributions from those plans before death.

Read: What’s the best way to take RMDs from your retirement accounts? Experts rate the top 3 strategies.

Another exception: workers who are still at the company providing the retirement account are not required to take an RMD from that account – but they do have to take an RMD from any other retirement accounts with an RMD rule. For example, if a 75-year-old employee has a 401(k) at her current employer, and has two 401(k) plans from previous jobs and a traditional IRA, she’s still required to take an RMD from the latter three accounts.

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