As we approach the end of 2024, retirees need to be acutely aware of their Required Minimum Distributions (RMDs). For those 73 years or older, RMDs are mandated annual withdrawals from retirement accounts, allowing the government to collect tax on your hard-earned savings before you pass away. This regulation aims to prevent the indefinite deferral of taxes on retirement funds.

If you turned 73 in 2024, you do have some grace; you may defer your first RMD until April 1, 2025. However, if you don’t meet this exception or if you’re not actively employed with a 401(k), you must complete your withdrawal by December 31 of this year. Act quickly and ensure you avoid these four costly RMD mistakes:

1. Failing to Withdraw Your Full RMD

Neglecting to take your full RMD is a substantial mistake. The IRS imposes a hefty 25% penalty on the amount that you fail to withdraw. For instance, if you’re required to withdraw $5,000 but only take out $4,000, the government will penalize you $250 for the missing $1,000. It’s worth noting that if you rectify this mistake within two years, the penalty could drop to 10%. Always remember—the consequences of not withdrawing are far worse than the taxes you’ll incur by taking your RMD.

2. Ignoring Separate RMDs for Each 401(k)