Taking a required minimum distribution from the wrong retirement account can cost you thousands of dollars in unnecessary taxes and penalties—and it’s one of the most common mistakes retirees make. The error typically happens when someone with multiple retirement accounts withdraws their RMD from the wrong type of account, or takes from an employer plan when the rules required them to take from an IRA instead. A 73-year-old with a $600,000 IRA balance and a $400,000 401(k) who accidentally takes their full RMD from the 401(k) and nothing from the IRA could face a 25% penalty of up to $5,660 on the shortfall, plus ordinary income tax on the full amount they should have withdrawn. This mistake isn’t just expensive—it’s entirely preventable once you understand which accounts have RMD requirements and where you’re allowed to take the money.
The IRS penalty structure has actually become stricter in some ways and more lenient in others under the SECURE Act 2.0 changes that went into effect in 2024 and 2026. The penalty for failing to take an RMD was reduced from 50% to 25%, which sounds like good news, but that still means a $10,000 missed RMD costs you $2,500 in penalties alone, before you owe ordinary income tax on the full distribution you should have taken. Recent data from Vanguard shows that approximately 6.7% of investors who are subject to RMD requirements missed their withdrawal in 2024, and the IRS estimates that over 580,000 IRA owners skip their RMDs each year, generating up to $1.7 billion in annual penalties. Understanding where and how to take your RMD is the straightforward way to avoid becoming part of that expensive statistic.
Table of Contents
- Which Retirement Accounts Require You to Start Taking RMDs?
- Why You Cannot Mix IRAs and Employer Plans When Taking RMDs
- The Real Cost of Taking Your RMD from the Wrong Account
- How Aggregation Rules Create Unexpected Shortfalls
- The Updated Penalty Structure and Why It Still Hurts
- Can You Fix a Missed RMD After the Fact?
- Why 580,000 Retirees Miss Their RMDs Every Year
- Frequently Asked Questions
Which Retirement Accounts Require You to Start Taking RMDs?
Not every retirement account triggers an RMD requirement, and that distinction is where many retirees first go wrong. Traditional IRAs, SEP IRAs, and SIMPLE IRAs all require you to take RMDs starting at age 73 if you were born between 1951 and 1959 (this age will increase to 75 for those born after 1960). Employer-sponsored plans—including 401(k)s, 403(b)s, and 457 plans—also require RMDs at age 73. However, Roth IRAs do not require RMDs during your lifetime, and this has become even more advantageous under SECURE Act 2.0: as of January 1, 2024, Roth 401(k)s and Roth 403(b)s no longer require RMDs either. If you have a Roth IRA, you can let it grow tax-free and leave it to your heirs without ever being forced to withdraw during your lifetime.
The rules also differ for inherited accounts. If you inherited an IRA or an employer plan account from someone else, that account is subject to separate and more aggressive RMD rules that depend on when the original account owner passed away and what your relationship was to them. A surviving spouse who inherits a spouse’s IRA can roll it into their own IRA and follow the regular RMD rules, but a non-spouse beneficiary—a child, for example—faces different timelines and withdrawal requirements. The key point: just because you have retirement savings doesn’t automatically mean you owe an RMD. Verify which of your accounts actually trigger the requirement before you calculate how much you need to withdraw.
Why You Cannot Mix IRAs and Employer Plans When Taking RMDs
The most costly aggregation mistake happens when retirees treat all their retirement accounts as interchangeable buckets. They do not work that way. IRAs—whether they’re Traditional IRAs, SEP IRAs, or SIMPLE IRAs—can be aggregated. This means if you have three different Traditional IRAs, you calculate the RMD for each one separately, add those amounts together, and then withdraw the total from whichever IRA you want, or split it between them however you prefer. A retiree with a $300,000 Traditional IRA, a $200,000 SEP IRA, and a $100,000 SIMPLE IRA (totaling $600,000) would calculate one combined RMD on that full $600,000 balance and could take the entire withdrawal from just the Traditional IRA if they wanted to. Employer plans, however, cannot be aggregated.
Each 401(k), 403(b), or 457 plan is completely separate, and each one requires its own RMD to be withdrawn from that specific plan. If you have two 401(k)s—perhaps one from a previous employer and one from your current job—each account’s RMD must come directly from that account. You cannot calculate the combined RMD and withdraw it all from one 401(k). The only significant exception is that multiple 403(b) accounts from the same employer can be aggregated, but this is the rare case. The critical rule: you can never satisfy an IRA RMD by taking money from an employer plan, and you can never satisfy an employer plan RMD by taking money from an IRA. If you attempt either of these, the IRS treats the account with the shortfall as if you took nothing.
The Real Cost of Taking Your RMD from the Wrong Account
Understanding the penalty structure requires looking at concrete numbers. Under the current rules (2026), if you fail to withdraw a required amount from a specific account, the IRS charges a 25% excise tax on whatever amount you didn’t withdraw. If your RMD from a particular 401(k) is $15,000 and you take nothing from it, you owe a 25% penalty on the full $15,000, which equals $3,750. That’s in addition to the ordinary income tax you still owe on the $15,000 you should have withdrawn. If you’re in the 24% federal income tax bracket, that $15,000 costs you $3,750 in penalties plus $3,600 in income tax, totaling $7,350 in taxes and penalties on a single missed withdrawal.
The Vanguard data shows that the average RMD amount among those who missed distributions was approximately $11,600, which means the average maximum 25% penalty on a typical missed RMD would be around $2,900, before ordinary income tax. That’s for one year. If you miss your RMD for three years in a row, you’re looking at potentially $8,700 in penalties alone, plus three years of income taxes on those withdrawals. There is some relief available: if you catch the mistake and correct it within two years, you can request that the penalty be reduced to just 10%, lowering the cost of that $11,600 missed RMD from $2,900 to $1,160. But this requires you to discover the error, take corrective action, and request the reduction—it doesn’t happen automatically.
How Aggregation Rules Create Unexpected Shortfalls
The aggregation rules create subtle traps that many retirees don’t see coming. Suppose you have three Traditional IRAs totaling $500,000 and your RMD is $18,867 (based on the age 73 life expectancy factor of 26.5). You decide to withdraw $18,867 from your smallest IRA, which has a balance of only $80,000. That works fine. But now imagine you have the same three IRAs, and you also have a Vanguard 401(k) from a previous job with a balance of $250,000. Your RMD on the 401(k) is $9,433, and your combined IRA RMD is still $18,867. If you withdraw the $18,867 from your IRAs but mistakenly believe that satisfies your entire RMD requirement, you’ve actually created a $9,433 shortfall on the 401(k).
The IRS sees that 401(k) as having zero RMD withdrawals, and you face a 25% penalty of $2,358 on that shortfall. This mistake is even more common when someone has multiple employer plans. If you have a 401(k) from a current employer and a 403(b) from a previous employer, each plan is completely separate (unless the 403(b) employer allows aggregation with other 403(b)s, which is rare). The RMD from each plan must come from that plan. Taking a withdrawal from your current 401(k) does nothing to satisfy the RMD requirement for your old 403(b). You must track and withdraw from both. The complexity multiplies further if you also have a SEP IRA from self-employment income—the SEP can be aggregated with your other IRAs, but it’s separate from the 401(k) and 403(b). A retiree juggling three account types across five different accounts has five separate withdrawal deadlines and at least two different aggregation groups to keep track of.
The Updated Penalty Structure and Why It Still Hurts
The SECURE Act 2.0 reduced the RMD penalty from 50% to 25%, which might sound like a major relief, but it’s important to understand what that penalty actually means in dollar terms. The 25% penalty is an excise tax—a separate tax on top of ordinary income tax—and it’s applied to the shortfall amount, not to the full RMD you should have taken. If your RMD is $20,000 and you take $10,000, your shortfall is $10,000. The 25% excise tax on that $10,000 shortfall is $2,500. You also still owe ordinary income tax on the full $20,000 you should have withdrawn in the first place, which could be anywhere from $4,800 (in the 24% bracket) to much more depending on your tax situation. The real cost of that missed $10,000 shortfall isn’t $2,500—it’s $2,500 in penalties plus whatever the income tax comes to.
There is a significant exception for early correction. If you catch your mistake and correct it within two years, the penalty drops to 10%. For that same $10,000 shortfall, a 10% penalty would be $1,000 instead of $2,500, saving you $1,500. However, this reduction requires you to actually discover the error and take action to correct it—the IRS doesn’t automatically grant it. You must file Form 5329 and request a penalty waiver for reasonable cause if you want consideration. The IRS has been increasingly willing to grant waivers and reductions when the taxpayer corrects the shortfall promptly and can demonstrate a legitimate reason for the miss, such as a misunderstanding of the aggregation rules or a simple computational error. But you have to ask; silence means you pay the full 25% penalty.
Can You Fix a Missed RMD After the Fact?
If you discover that you missed an RMD in a prior year, there are corrective steps you can take, though the faster you act the better. First, take the missed distribution immediately, even if you’re well into the next year. The IRS would much rather see you take the money out late than not take it out at all. Second, file IRS Form 5329 (Report of Excess Contributions to Individual Retirement Arrangements) with a letter explaining what happened. In that letter, explain the circumstances of the miss and describe the corrective action you’ve taken.
If you missed the RMD due to a reasonable cause—such as genuine confusion about which accounts required distributions, or a miscommunication with your financial advisor—the IRS may grant a penalty waiver entirely. The IRS’s guidelines for reasonable cause include situations where you relied on professional advice (from a tax preparer or financial advisor) that turned out to be incorrect, where you had a life circumstance that prevented you from understanding or fulfilling the requirement, or where the account custodian failed to provide required notices. Simply forgetting is a weaker case, but it’s not automatically disqualifying. The key is that you’ve corrected the mistake promptly and are showing good faith by filing the form and requesting consideration. Even if the IRS doesn’t grant a full waiver, correcting within two years typically reduces the penalty to 10% instead of 25%.
Why 580,000 Retirees Miss Their RMDs Every Year
The raw statistics are sobering. Vanguard research shows that 6.7% of investors who are subject to RMD requirements missed their withdrawal in 2024. The IRS estimates that approximately 580,000 IRA owners skip RMDs annually, generating up to $1.7 billion in total penalties. The average missed RMD amount is $11,600, which means the average penalty costs retirees approximately $2,900 per year just in the excise tax, before ordinary income tax. These aren’t typically cases of retirees deliberately ignoring the rules—they’re the result of complexity, account consolidation, life changes, and simple miscommunication. A retiree who had their accounts at three different institutions might never receive consolidated RMD guidance.
Someone who rolled a 401(k) into an IRA might not realize the old 401(k) they left behind still required its own RMD. A surviving spouse might not understand that inherited account RMD rules differ from the regular rules. The real cost extends beyond the immediate penalty. An IRA owner who misses an RMD and doesn’t correct it within two years is also potentially subject to a failure to report tax on their return, which can result in negligence penalties if the IRS audits. Additionally, failing to take RMDs can complicate other tax situations—if you’re claiming certain deductions that depend on income level, an unexpected RMD in a correction year might push you over a threshold and cause additional tax complications. The stakes are high enough that many retirees work with a CPA or financial advisor specifically to track and coordinate their RMDs across all their accounts. For those managing this independently, creating a simple spreadsheet or checklist at age 72 (before RMDs begin) that lists every retirement account, its RMD requirement start date, the specific account number, and the required withdrawal deadline can prevent costly mistakes.
Frequently Asked Questions
What’s the difference between aggregation for IRAs and employer plans?
IRAs (Traditional, SEP, and SIMPLE) can be combined: calculate each IRA’s separate RMD, add them together, and withdraw the total from any IRA. Employer plans (401(k), 403(b), 457) cannot be combined—each plan requires its own RMD withdrawn directly from that specific plan. You can never use an IRA to satisfy an employer plan RMD or vice versa.
What happens if I miss an RMD deadline?
You face a 25% excise tax on the amount you didn’t withdraw, plus ordinary income tax on the full RMD you should have taken. If you correct it within two years, the penalty reduces to 10%. If you file Form 5329 and request a waiver based on reasonable cause, the IRS may waive the penalty entirely.
Do Roth accounts require RMDs?
Roth IRAs do not require RMDs during your lifetime. As of January 1, 2024, Roth 401(k)s and Roth 403(b)s also have no RMD requirements. This is one advantage of Roth accounts in retirement planning.
When do RMDs start in 2026?
For those born between 1951 and 1959, RMDs begin at age 73. Your first RMD must be withdrawn by April 1 of the year after you turn 73. Subsequent RMDs are due by December 31 each year.
Can I take an IRA withdrawal to satisfy my 401(k) RMD?
No. IRA RMDs must come from IRAs, and 401(k) RMDs must come from 401(k)s. The IRS treats accounts separately, and taking from the wrong type of account results in a penalty on the untaken amount.
How do I correct a missed RMD?
Take the distribution immediately, then file IRS Form 5329 with a letter explaining the situation and requesting a penalty waiver or reduction. The IRS may waive penalties for reasonable cause, or reduce the penalty to 10% if you correct within two years.