- Missing an RMD in twenty twenty-six triggers a twenty-five percent excise tax on the shortfall.
- The SECURE Act two point zero raised the RMD age to seventy-three for many account owners.
- Higher earners must make Roth-only catch-up contributions if their previous year income exceeded one hundred forty-five thousand dollars.
(UNITED STATES) — Missing a required minimum distribution can trigger one of the IRS’s steepest retirement penalties: 25% of the amount that should have been withdrawn for tax year 2026, with a reduction to 10% if the mistake is corrected on time.
The penalty rules matter more in 2026 because SECURE Act 2.0 changed both the age for required minimum distributions and the correction rules. Under current law, RMDs generally start at age 73 for people born 1951 through 1959, and at age 75 for people born 1960 or later.
IRS guidance for withdrawals appears in Publication 590-B, and penalty reporting generally goes on Form 5329.
Free toolSubstantial Presence Test CalculatorThe same law also changed retirement savings at the front end. Workers under 50 can defer up to $23,500 into a 401(k) in 2026. Workers 50 and older can add a standard catch-up contribution of $8,000, for a total of $32,500.
Workers ages 60 through 63 can make an enhanced catch-up of $11,250 in eligible employer plans, bringing the total to as much as $34,750 or $35,750, depending on the plan limit applied for that year. At 64, the catch-up reverts to the standard age-50 amount.
Another 2026 change can create plan-level problems. Employees who earned more than $145,000 in prior-year wages from the same employer generally must make catch-up contributions as Roth contributions. Some plan materials use an indexed figure of $150,000, but the statute’s baseline threshold is $145,000, subject to inflation adjustment.
If a plan does not permit Roth catch-up contributions, affected workers can lose the ability to make catch-up deferrals until the plan is fixed.
SECURE Act 2.0 also leaves several age markers in place. At 59½, most retirement account withdrawals avoid the 10% early distribution penalty, though income tax often still applies. At 62, Social Security can begin, but reduced benefits usually follow an early claim. At 70½, IRA owners can begin qualified charitable distributions, subject to the rules in Publication 590-B.
Immigrants and visa holders face the same retirement penalties if they are U.S. tax residents. A green card holder or a worker who meets the substantial presence test generally reports retirement distributions on a U.S. return.
Publication 519, the IRS guide for aliens, controls residency rules. A recent arrival who shifted from exempt student status to tax residency can end up with a dual-status year, which makes penalty reporting and withholding more technical.
⚠️ Warning: The missed-RMD penalty applies to the amount not withdrawn, not to the full account balance. Filing Form 5329 and correcting the shortfall quickly can cut the excise tax from 25% to 10%.
| Missed retirement rule | Penalty rate | Example amount | Potential penalty |
|---|---|---|---|
| Missed RMD, not corrected | 25% | $8,000 shortfall | $2,000 |
| Missed RMD, corrected on time | 10% | $8,000 shortfall | $800 |
| Early withdrawal before 59½ | 10% | $20,000 taxable distribution | $2,000, plus income tax |
The IRS can waive the excise tax for reasonable cause in some cases. Common examples include serious illness, incorrect advice from a plan administrator, or a distribution error that was corrected after discovery. The waiver request is usually made with Form 5329 and a written explanation.
The account owner should also withdraw the missed amount as soon as possible. Waiting weakens the argument for relief.
Two steps prevent most of these penalties. First, confirm the correct RMD start date by birth year, especially after the SECURE Act 2.0 changes. Second, check employer plan documents before making a 2026 catch-up contribution, particularly for workers in the 60 to 63 enhanced window and for higher earners subject to Roth catch-up rules.
The enhanced catch-up applies to 401(k), 403(b), governmental 457(b), and TSP plans. It does not apply to IRAs. IRA catch-up contributions remain much smaller, at $1,100 for 2026.
Voluntary correction is often the best path after an error. A taxpayer who missed an RMD should take the distribution, document the correction, and file Form 5329 with the 2026 return filed in 2027, or amend if necessary.
A worker blocked from making catch-up contributions because a plan lacks Roth features should ask the employer, in writing, whether the plan will adopt the required change and whether payroll elections need updating before year-end.
Anyone approaching age 73 or 75, changing jobs, or moving from visa status to permanent residency should review retirement distributions, withholding, and residency status before filing. Check Publication 519, Publication 590-B, and the instructions for Form 5329.
If the account involves a missed RMD, an early distribution exception, or a dual-status return, a CPA or enrolled agent should review the filing before submission.
⚠️ Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.
