A new report from Vanguard highlights a costly oversight affecting hundreds of thousands of older Americans: failing to take required minimum distributions (RMDs) from their retirement accounts, resulting in billions of dollars in unnecessary tax penalties.

In 2024, approximately 585,000 Vanguard clients with individual retirement accounts (IRAs) who were of RMD age did not withdraw any funds, according to the firm’s analysis. Overall, 6.7% of clients aged 70 and older took no withdrawals at all, despite being required to do so. For these individuals, the average required distribution amounted to $11,600, potentially triggering penalties ranging from $1,160 (at the reduced 10% rate) to $2,900 (at the full 25% rate).

The IRS imposes a 25% excise tax on the amount not withdrawn as required, though this can be lowered to 10% if the error is corrected within a two-year “correction window.” Additionally, 24% of Vanguard’s RMD-age clients withdrew less than the mandated amount, while 69% met or exceeded the requirement.
The problem disproportionately affects those with smaller balances—56.8% of clients with accounts under $5,000 failed to comply—but even wealthier retirees aren’t immune, with nearly 5% of those holding $250,000 to $500,000 also missing RMDs. For high-balance accounts of $1 million or more, the average potential penalty reached $8,792.

Repeat offenses are common: 55% of clients who skipped an RMD in one year did so again the next. Andy Reed, head of behavioral economics research at Vanguard, described the issue bluntly: “rather than ‘set and forget,’ many simply ‘forget and forget.'”

To avoid these pitfalls, Vanguard urges retirees to automate their RMD withdrawals through their account provider when possible. Another key strategy is consolidating multiple retirement accounts into one, making it easier to track and manage distributions. Aaron Goodman, a senior investment strategist at Vanguard, noted: “With investors changing jobs nine times or more in their working careers, it’s tough to keep tabs on all retirement accounts. Combining IRAs and putting RMDs on autopilot takes forgetting out of the equation.”

As life expectancies rise and more Americans enter retirement with multiple accounts, these simple steps could save billions in avoided penalties while ensuring compliance with IRS rules.

Original article by William Edwards, Business Insider (January 4, 2026).