Don’t make this year-end retirement mistake — Vanguard says it’s draining savings fast

Retirement required minimum distribution 2025: As the year comes to a close, many retirees are busy with holiday preparations, but there’s an important deadline that shouldn’t be overlooked: taking required minimum distributions, or RMDs, from retirement accounts, as per a report. Missing these annual withdrawals could have serious financial consequences.

Vanguard Estimates Missed RMDs Could Cost Retirees Billions

Research from Vanguard estimates that missed RMDs could cost retirees up to $1.7 billion each year, as per an Investopedia report. RMDs are required starting at age 73 and apply to accounts like 401(k)s and traditional IRAs. People who are still working and have a 401(k) through their current employer can delay RMDs from that account, but most retirees must take action, as per the Investopedia report.

Missing an RMD Can Lead to Steep Tax Penalties

For Americans 73 and older, missing an RMD can result in a steep tax penalty. Vanguard’s data show that 6.7% of RMD-eligible investors failed to take their distributions in 2024. The average RMD was $11,600, meaning missed withdrawals could lead to penalties between $1,160 and $2,900 per person.


Also read: Are banks open the day after Christmas as Trump declared December 26 a federal holiday? What to know about banks, post office, and stock market today

How Many Retirees Miss Their RMDs Each Year

With 8.7 million IRA holders in the US, Vanguard estimates that around 585,000 investors miss their RMDs each year, resulting in potential penalties totaling between $678 million and $1.7 billion, as per the Investopedia report.

Important RMD Deadlines to Keep in Mind

For those turning 73 this year, the first RMD must be taken by April 1, 2026. Retirees who are 74 or older have until December 31, 2025, to take their RMDs. Failing to meet these deadlines can trigger penalties of 10% if the distribution is eventually taken within two years, or 25% if it is not, as per the Investopedia report.

Also read: Minimum wages in 2026: See which states are raising pay, and who is stuck at $7.25
required minimum distribution 2025

Vanguard’s Advice on Reducing Missed RMDs

Andy Reed, head of behavioral economics research at Vanguard, said that, “Reducing the rate of missed RMDs by even a modest amount could save investors hundreds of millions of dollars each year,” as quoted by Investopedia.

FAQs

What is an RMD?
A required minimum distribution is an annual withdrawal from retirement accounts like 401(k)s and traditional IRAs starting at age 73.

Who needs to take an RMD?
Retirees 73 and older with accounts like 401(k)s or traditional IRAs must take RMDs.