{"id":388515,"date":"2026-01-04T23:16:13","date_gmt":"2026-01-04T23:16:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/388515\/"},"modified":"2026-01-04T23:16:13","modified_gmt":"2026-01-04T23:16:13","slug":"older-clients-not-taking-rmds-pay-billions-in-unnecessary-taxes-vanguard","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/388515\/","title":{"rendered":"Older Clients Not Taking RMDs Pay Billions in Unnecessary Taxes: Vanguard"},"content":{"rendered":"

A substantial number of elderly, retirement-age investors are failing to take required minimum distributions, or RMDs<\/a>, a new Vanguard report shows.<\/p>\n

This ultimately results in tax penalties, which can amount to thousands of dollars, depending on the account values.<\/p>\n

IRS rules stipulate that once investors reach a certain age \u2014 for example, 70.5 for those born before June 31, 1949 \u2014 they must start taking a required distribution from their retirement accounts. Distribution amounts vary and depend on how much you have in the account and your and potentially your spouse’s life expectancies.<\/p>\n

Not taking RMDs results in a 25% tax penalty on the RMD amount. That can sometimes be reduced to 10% if the RMD is taken within a couple of years after the original deadline.<\/p>\n

In 2024 alone, 585,000 of the Vanguard’s clients with individual retirement accounts, or IRAs<\/a>, failed to take RMDs.<\/p>\n

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“We found that 6.7% of RMD-age clients did not take any withdrawal in 2024. Among these clients, the average RMD amount was $11,600, generating a potential tax penalty of between $1,160 and $2,900 (at penalty rates of 10% and 25%, respectively),” the report said.<\/p>\n

It continued: “Another 24% of clients took a withdrawal in 2024 that was below the RMD threshold, while 69% took a withdrawal at or above the RMD level.”<\/p>\n

Investors with smaller balances tend to miss RMD deadlines more than wealthier investors, with 56.8% of investors with an account balance under $5,000 not meeting withdrawal requirements.<\/p>\n

Still, almost 5% of investors with savings between $250,000 and $500,000 did not hit their requirements.<\/p>\n

Naturally, penalties are highest for those with more money. Average penalties for those with at least $1 million in their accounts were $8,792.<\/p>\n

\"retirement<\/p>\n

Vanguard<\/p>\n

Vanguard said that those who miss distributions are more likely to miss them in following years \u2014 55% who missed them did so again the next year.<\/p>\n

As Andy Reed, Vanguard’s head of behavioral economics research, wrote in the report: “rather than ‘set and forget,’ many simply ‘forget and forget.'”<\/p>\n

The firm recommended a couple solutions to reduce the number of investors not complying with RMD rules.<\/p>\n

One is to automate distributions with your retirement account provider, if they offer such a service. Another is to combine retirement accounts if you have more than one, so that you only have to remember a single distribution.<\/p>\n

“With investors changing jobs nine times or more in their working careers, it’s tough to keep tabs on all retirement accounts,” wrote Aaron Goodman, a senior investment strategist at Vanguard. “Combining IRAs and putting RMDs on autopilot takes forgetting out of the equation.”<\/p>\n","protected":false},"excerpt":{"rendered":"A substantial number of elderly, retirement-age investors are failing to take required minimum distributions, or RMDs, a new…\n","protected":false},"author":2,"featured_media":388516,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":{"0":"post-388515","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/388515","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=388515"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/388515\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/388516"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=388515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=388515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=388515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}