3 RMD Mistakes to Avoid at All Costs in 2026

Many people who manage to retire with savings are thankful to have income to supplement their monthly Social Security benefits. And you may be reliant on IRA or 401(k) withdrawals to help cover your basic expenses.

But if your living costs are low or you have very large Social Security checks coming your way each month, then you may not need to tap your retirement account for income. And if so, waiting could work to your benefit. It not only allows your money to continue growing in a tax-advantaged manner, but it also means avoiding a tax bill on retirement plan withdrawals.

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But unless you have a Roth IRA or 401(k), you're eventually going to be forced to take required minimum distributions, or RMDs. And it's important to understand how they work so you don't wind up with a penalty on your hands.

Here are three RMD mistakes you should make every effort to avoid this year.

1. Missing the deadline

Once you turn 73, the IRS wants you to start taking withdrawals from your retirement savings. Now, it's true that you can defer your first RMD to April 1 of the year after you turn 73. But the general RMD deadline is Dec. 31 each year. And if you miss it, you risk a 25% penalty on whatever sum you fail to remove.

The end of the year can be a busy time, though. So it's a good idea to automate your RMDs so you don't forget about them accidentally.

2. Forgetting about the consequences of delaying your first distribution

As mentioned, you can put off your first RMD without penalty to April 1 of the year after you turn 73. Doing so allows you to also defer your associated tax bill.

But if you defer your first RMD, you'll have to take two RMDs the following year. That could result in a large tax bill and lead to other unfavorable consequences, too.

For example, too large an income could leave you paying surcharges on your Medicare premiums a couple of years down the line. So you'll need to be careful if you're looking at a year with two RMDs instead of just one.

3. Assuming you're off the hook because you're still working

Just because you're old enough to face RMDs doesn't mean you aren't still working. And if so, you don't have to take an RMD from the retirement plan your current employer is providing to you as long as you don't own more than 5% of the business.

This exception, however, applies only to the retirement plan from your current employer. If you have savings in other 401(k)s or IRAs, you have to start taking those RMDs once you turn 73.

Botching your RMD could leave you with a nasty penalty that really stings. It could also leave you with burdensome taxes. Do your best to avoid these RMD mistakes this year so you don't suffer any negative consequences.

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