What is the excise tax rate imposed by the IRS for individuals aged 70½ or older who do not take required minimum distributions?

For individuals aged 70½ or older, the IRS mandates that they take required minimum distributions (RMDs) from their retirement accounts, such as traditional IRAs and 401(k)s. If an individual fails to withdraw the required amount, they are subject to a significant penalty, often referred to as an excise tax. This excise tax rate is set at 50% of the amount that should have been withdrawn but was not.

This penalty serves as an incentive to ensure that individuals comply with the RMD rules and take their distributions as required. The tax reflects the IRS's intent to encourage the depletion of retirement savings during the account holder's lifetime rather than allowing funds to grow indefinitely, which could result in a taxable event later for beneficiaries.

While there are other penalties and tax rates associated with retirement accounts, the specific excise tax for failing to take required distributions is explicitly defined as 50%. This understanding is crucial for anyone navigating retirement planning and compliance with IRS regulations.