Forgot to Take Your RMD? Here's What to Do Right Away.

You've spent years planning for retirement, dreaming of that day when you stop watching the clock and begin to relax. Since you don't have to begin taking required minimum distributions (RMDs) from your retirement account until age 73, you barely think about your accounts, happy to know the money you've saved has more time to grow.

Before you know it, though, you're 73 (or 75 if you were born in 1960 or later) and must begin to withdraw money from your employer-sponsored retirement plan. However, you suffered a serious break to your leg in a skiing accident and have spent six weeks in the hospital. During that time, you missed your first RMD, and it looks like you could be hit with a 25% penalty on the amount you were supposed to withdraw.

Here's what you should do right away:

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Don't panic

While the IRS is serious about retirees making withdrawals and collecting taxes on that money, the agency isn't totally without a heart. However, there are steps you should take:

1. Make the withdrawal

Once you realize you've missed a required withdrawal, take that money from your 401(k), IRA, or other tax-favored account.

2. File Form 5329

Filing Form 5329 could cause the IRS to waive the penalty. Fill the form out entirely and attach a statement letting the IRS know why you didn't make the withdrawal and requesting a penalty waiver. You don't need to make a specific statement, but do include the following:

• A request for waiver of the Additional Tax on Excess Accumulations.
• The year the RMD was missed.
• When you realized you'd missed the RMD.
• Why you missed the distribution.
• The date you took the missed RMD.

3. Wait for the IRS' decision

If you're requesting a penalty waiver, wait until the IRS determines if it will be granted. If not, you'll be informed that you owe the penalty, and can make the payment then.

If you don't have a good reason for the missed withdrawal

Perhaps you were on vacation and simply forgot to take your RMD. If that's the case, you'll still fill out Form 5329. Instead of requesting a waiver, though, you'll scroll down to Line 52 to learn how much you should have taken. While the penalty is an excise tax equal to 25% of the amount you failed to withdraw, the penalty may be reduced to 10% if you correct the missed distribution within two years.

As carefree as retirement can be, there's plenty for you to remember. One of your primary tasks around the RMD due date (Dec. 31) is to ensure your RMD is taken care of. If you happen to miss it, it's not the end of the world, but there are steps you must take to minimize the impact.

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