What Would Happen If You Never Took an RMD?

July 31, 2025

You're 73. You've got $722,000 in your TSP and IRA combined.

The law says you must take a Required Minimum Distribution (RMD) this year—or else.

But what if you didn’t?

You might assume the IRS will immediately slap you with a 50% penalty, drain your accounts, and garnish your federal pension.

But the truth is... murkier. And far more useful to know.

The Official Rule (And Its Brutal Math):

If you miss your RMD, the IRS can assess a penalty equal to 50% of the amount you should’ve withdrawn.

  • Missed a $10,000 RMD? You could owe $5,000, plus the original distribution.

  • Do that a few years in a row? It’s catastrophic.

But here’s the twist: The IRS doesn’t automatically catch every missed RMD. And even when it does…

Under IRS Form 5329, you can request a waiver of the 50% penalty if:

  • The shortfall was due to “reasonable error”

  • You’re taking steps to correct it

  • You submit the form with a brief explanation

And the IRS grants many of these waivers.

So no, you’re not guaranteed to pay the penalty… but relying on that isn’t a retirement strategy.

The Bigger Danger Isn’t the IRS—It’s Your Plan

Even if the IRS lets you off the hook, here’s what skipping or delaying RMDs can do to your retirement:

1. Creates a Tax Tsunami Later: The longer you delay, the more your tax-deferred accounts grow—forcing larger taxable withdrawals later, possibly in higher brackets.

2. Triggers Medicare IRMAA Penalties: Bigger RMDs inflate your income, which can bump you into Medicare surcharge tiers, costing thousands in extra premiums.

3. Destroys Your Roth Conversion Window: The years before RMDs start are prime time for Roth conversions. Miss that window, and you're locked into higher taxes forever.

Here’s what many smart retirees do instead:

  • Roth converting aggressively in their early 60s

  • Tapping taxable assets first to control MAGI

  • Using Qualified Charitable Distributions (QCDs) to offset RMDs tax-free

  • Planning RMDs into their income waterfall—not around them

Bottom Line:

💬 “What happens if I don’t take an RMD?”

You risk a penalty—but more importantly, you risk losing control of your retirement timeline, tax bracket, and healthcare costs.

The penalty might be avoidable.

The consequences to your plan? Not so much.

—FWR