Please note that Portnoff Financial has joined with Tempus Wealth Planning and some information here may no longer be applicable. Please contact Jeremy Portnoff at 949-226-8342 (CA) or 732-226-3113 (NJ) for additional information.  We apologize for any confusion while we are in transition. 

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Fixing a Missed RMD in 5 Easy Steps

Once you reach age 70½ , the government requires that a specific minimum amount be withdrawn from your retirement account each year. If you miss the deadline or don’t take enough, Uncle Sam could hit you with a 50% penalty!

Did you forget to take a required minimum distribution (RMD) from your retirement account?

Unsure of how to fix the error? Make sure to consult your adviser as soon as possible. Click here to contact us. Fortunately, you’re not the first person to forget to take a distribution. There are steps you can take to fix the problem and possibly even get the penalty waived. We are here to help you do that. 

What is a missed RMD (required minimum distribution)?

RMDs must be taken by IRA owners beginning in the year they turn age 70 ½ and by IRA and non-spouse Roth beneficiaries beginning in the year after the death of the account owner.  RMDs not taken are subject to a penalty of 50% of the amount not taken each year.

When should you look for a missed RMD?

You should look for a missed RMD every year after an account owner turns age 70 ½ and when an IRA or non-spouse Roth beneficiary inherits an IRA.  Ask your advisor to double check any calculations to be sure they are correct.

#1 - Look at the balance sheet.  Determine the prior year-end IRA balance for the year that an RMD was not fully satisfied.  (Note: There were no IRA RMDs for 2009.)

#2 - Determine the life expectancy factor for all missed years.  IRA owners use their age each year and look up the corresponding factor on the Uniform Lifetime Table.  Non-spouse IRA beneficiaries use their age only in the year after the account owner’s death and look up the corresponding factor on the Single Life Expectancy Table.  In each subsequent year, a beneficiary will subtract one from the previous year’s factor.  (Remember: These are the general rules for determining life expectancy factors.  There are many exceptions to these rules.)

#3 - Do some simple math.  Divide the account balance by the life expectancy factor for each missed year’s RMD and withdraw that amount from the IRA.

#4 - Important forms to file.  File IRS Form 5329 for each missed RMD to report the missed distribution and penalty.  The penalty can be waived for good cause.  Attach a letter to the form requesting a waiver.  It is helpful to include language in your letter explaining to the IRS why the distributions were missed, that the problem has been corrected and that procedures are in place to avoid future problems.

#5 - It will never happen again.  Set up procedures to ensure you take future RMDs.  Many custodians offer an option to distribute RMDs automatically each year.  If you struggle to remember to take your RMD, setting up an automatic distribution may be beneficial.

Remember, we are here to guide you through protecting your hard earned assets. Click here to contact us. 

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