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← Series 7: Opens & Maintains Customer Accounts
Series 7 practice questionhardRetirement Accounts — RMD Scenario

A client turned 73 this year and has a Traditional IRA worth $500,000. She has not yet taken any distributions. What is the consequence if she fails to take her required minimum distribution by the deadline?

  1. AShe will owe an excise tax of 25% on the amount that should have been withdrawn but was not✓ Correct answer
  2. BHer IRA will be automatically closed by the custodian
  3. CShe will lose tax-deferred status on the entire IRA balance
  4. DThere is no penalty as long as she takes the distribution the following year
Explanation

Why A — She will owe an excise tax of 25% on the amount that should have been withdrawn but was not

Under the SECURE 2.0 Act, the excise tax for failing to take a required minimum distribution was reduced from 50% to 25% of the shortfall amount (the difference between what was required and what was actually distributed). If corrected in a timely manner, the penalty may be further reduced to 10%. RMDs must begin by April 1 of the year following the year the account owner turns 73.

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