What do I do if I miss my required minimum distribution?

What do I do if I miss my Required Minimum Distribution?

Required Minimum Distributions (RMDs) are just that – required. The penalty for failing to take a RMD on time is 50% of the amount of the RMD. That’s one of the harshest penalties in the tax code. Miss a $20,000 RMD and you’ll owe a $10,000 penalty.

You can get that penalty waived if you can present a good case for missing the distribution. If you missed your 2018 RMD, you first need to take the 2018 RMD from your IRA. It will be taxable income for 2019 and it does not count toward the 2019 RMD. (You will still have to take the RMD for 2019 too.) Once the 2018 RMD is satisfied, you should file Form 5329 for 2018.

On the Form 5329, you will omit the penalty but include a letter to the IRS asking for a waiver and explaining why the distribution was not made. You will probably not get any reply from IRS, which is normal. No news is likely good news. There are no guarantees but the consensus among tax experts is if you do not hear from the IRS within three years, you should be in the clear. If your request is denied, expect to pay the 50% penalty plus another penalty and some interest on the unpaid penalty.

While the process for handling a missed RMD is the same for qualified retirement plans like 401(k)s, the RMD rules differ from the ones which apply to IRAs. It is easy to miss an RMD if you own several accounts with different rules.

Your 401(k) is not subject to RMDs if: you are still working for the sponsoring company, you own less than 5% of that company, and the plan explicitly exempts you from RMDs.  The Summary Plan Description will tell you if the plan has the required language.

Even if your employer’s plan exempts you from RMDs, you are still subject to them for any other 401(k), retirement plan, traditional IRA, Inherited IRA, Inherited Roth IRA, or Inherited retirement plan. Only your individual Roth IRAs are not subject to RMDs.

RMDs are calculated separately for each account. Further, with the most notable exception being your traditional IRAs, generally the RMD for each account must come from that particular account. In other words, you can’t pay a 401(k)’s RMD by taking money out of an IRA.


Making News…

We frequently produce Q&A columns for Florida Today and MarketWatch, a personal finance website of the Wall Street Journal, as well as pieces for Investopedia, Orlando Sentinel, Financial Advisor magazine and others. Below is a sampling from the last three months.


We continue to help the Orlando Sentinel with reader questions for its Ask An Expert feature. Mike Salmon, CFP® helped an 89-year-old decide what to do with an inheritance. Tommy Lucas, CFP® talked about determining primary residence for capital gain exclusion purposes and covered some RMD basics.  Charlie Fitzgerald, CFP® addressed a concern about using IRA money to make charitable contributions.

In the News…

Charlie Fitzgerald, CFPThe March 2nd issue of InvestmentNews featured a multi-page spread on the poor state of financial literacy in America. Given his advocacy for the FPA of Florida to add basic financial matters to Florida’s school curriculum, Charlie Fitzgerald, CFP®  was a natural choice to provide commentary from the feature.

Charlie also spent some time in Tampa to meet with 6 prospective interns for our summer 2019 internship program. The students are part of the University of South Florida’s Financial Planning Degree program, the first of its kind in a State university’s Business College. Charlie was invited by the program director Dr. Laura Mattia to join the program’s Advisory Council last year.

As has been the case the last few years, Moisand Fitzgerald Tamayo has once again been named one of the Top Financial Advisors in Florida for 2019 by AdvisoryHQ, According to their review, “Moisand Fitzgerald Tamayo takes their client-advisory relationship seriously and helps simplify the process of navigation through a complex financial world. Their experience and knowledge help them expertly identify the best course of action for each client’s unique needs…In keeping with the firm’s mission to take the complication out of personal financial planning, Moisand Fitzgerald Tamayo keeps its service offerings as straightforward as possible.” Their selection criteria can be found here.

Dan Moisand was on a panel at the Inside Retirement conferenceDan Moisand spoke at two conferences recently. At the Inside Retirement conference put on by Financial Advisor magazine, Dan served as a panelist for a discussion about how Millennial children will impact parents’ retirement more than earlier generations. He was also on a panel at the magazine’s Invest in Women conference titled “Protecting Loved Ones From Scammers.”


Things We Found of Note

58% of U.S. adults have no estate planning documents in place (caring.com)

72% of people surveyed do NOT know their parents’ legacy wishes (BMO Wealth Management)

50% of inheritances are completely squandered after receipt (U.S. News & World Report)

In March, two independent studies were released showing that the vast majority of trading volume in cryptocurrencies is fake. TIE and Bitwise used differing methodologies to come to the same conclusion. The Bitwise study was presented to the U.S. Security and Exchange Commission and found that of the $6 billion spot bitcoin trading reported by exchanges, 95 percent is fake. 



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Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on FacebookLinkedIn, or Twitter.  

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About Dan Moisand

Dan Moisand is a fee-only financial advisor with Moisand Fitzgerald Tamayo, LLC. He is a regular contributor for multiple outlets, including Florida Today, MarketWatch, and The Wall Street Journal. His writing and financial advice have also been featured in Financial Planning, Investment Advisor, Wealth Manager/Advising Boomers, Forbes, Smart Money, and The New York Times, among other publications. He is the only two-time winner of the Journal of Financial Planning’s “Call for Papers” competition and has been named a top financial planner and advisor by multiple publications. Investment News named Dan one of the “twenty most influential men and women” in the history of financial planning. He currently serves on the Board of Directors for the CFP (Certified Financial Planner) Board.


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