Retiree’s RMDs: Consequences of 5-Year Miss – Insights for Finance Enthusiasts

  • Understanding the penalties for missing RMDs
  • Implications for beneficiaries
  • Setting up automatic withdrawals
  • The importance of a power of attorney


Retirement can bring about many financial considerations, and one important aspect is taking the required minimum distributions (RMDs) from your traditional IRA. However, what happens if you miss these distributions for several years? This article explores the potential penalties, implications for beneficiaries, and ways to ensure compliance with RMD rules.

Penalties for Missing RMDs

Previously, there was a 50% penalty for failing to take RMDs from your traditional IRA. However, this penalty has been reduced to 25% and can even be further reduced to 10% if the error is corrected within two years. But how does this penalty apply if RMDs are taken five years later?

Calculation of Penalties

According to Sergio Garcia, a certified financial planner, if RMDs are taken five years later, the penalty would be 25% of the amount that should have been distributed, plus the tax rate for the year the RMD was due. This means that the penalty includes both the 25% and the applicable tax rate for the missed RMD.

Implications for Beneficiaries

If an individual passes away after failing to take their RMDs, the beneficiary would be required to take the distributions on their behalf. In this situation, the beneficiary would receive the RMD and be taxed on the distribution. Only if the original IRA owner named their estate as the beneficiary would the estate receive the distribution. Regardless, if the RMD is not satisfied by the due date, a penalty may still apply.

Setting Up Automatic Withdrawals

To avoid missing RMDs, many investment firms offer the option to set up automatic withdrawals related to your RMD. By reaching out to your plan provider, you can ensure that your RMDs are automatically calculated and distributed on time. This provides peace of mind and eliminates the risk of penalties for missed distributions.

The Importance of a Power of Attorney

In the event of incapacitation, it is crucial to have a power of attorney in place to handle your financial affairs. This legal document grants authority to another individual to act on your behalf. It is essential to communicate clearly with the trusted person you choose as your power of attorney, outlining your financial wishes and limitations. Consult with a qualified estate attorney who can help you draft the document according to the rules and regulations of your state and locality.

Additionally, before setting up a power of attorney, check with your IRA custodian as they may have their own rules and procedures for handling these accounts. Consider limiting the authority given to your power of attorney to only include withdrawals for RMDs.

Lastly, it is advisable for your wife to also have her own power of attorney to ensure her financial affairs are in order.


Missing RMDs from your traditional IRA can result in penalties, but there are ways to rectify the situation. By filing the necessary forms and providing an explanation for the missed distributions, penalties may potentially be waived. Setting up automatic withdrawals and having a power of attorney in place can also help ensure compliance with RMD rules. It is essential to consult with financial advisors and estate attorneys to navigate these complexities and ensure a secure retirement.

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