The Double Distribution Trap: Why Retirees Need to Plan Their RMDs

The penalty for missing a required minimum distribution is 25% of the amount not withdrawn—and until recently, it was 50%. "I'm so glad they changed that rule," says Brendan McMurtry, Senior Wealth Manager at Financial Sense, in a conversation with wealth advisor Ryan Poblava. "That old one was pretty harsh." But the real surprise for many retirees isn't the penalty itself—it's the cascade of tax consequences that can follow from a single miscalculation.

When Two RMDs Land in One Year

Required minimum distributions begin at age 73 for people born before 1960, and at 75 for those born in 1960 or later (starting in 2033). The first RMD comes with a special option: you can delay it until April 1st of the year after you turn RMD age. That sounds helpful, but it creates what advisors call the "double distribution trap."

"If you delay your first RMD until April 1st of the following year, you still have to take that second RMD that year as well, by December 31st," Poblava explains. "That means two required distributions in one tax year, which could potentially push you into a much higher tax bracket." The trap is easy to miss because the April 1st deadline looks like a tax deadline—but it isn't. The tax deadline is April 15th, and confusing the two can trigger the 25% excise penalty.