If you've been diligently saving for retirement in your 401(k) or traditional IRA, there's a moment that eventually arrives: the IRS wants its share. That moment comes in the form of Required Minimum Distributions, or RMDs: and in 2026, plenty of retirees here in Stuart, FL (and across the country) are making costly mistakes without even realizing it.

The penalties for getting RMDs wrong can be brutal. We're talking about a 25% penalty on amounts you fail to withdraw, plus you still owe the regular income taxes on top of that. Ouch.

The good news? These mistakes are completely avoidable once you know what to watch out for. Let's walk through the most common RMD blunders we see and how you can sidestep them.

Table of Contents

  1. Missing the RMD Deadline
  2. The First-Year RMD Trap
  3. Getting Tax Withholding Wrong
  4. Ignoring the Ripple Effects on Your Tax Return
  5. Skipping Qualified Charitable Distributions
  6. Reinvesting RMDs the Wrong Way
  7. How to Stay on Track with Your RMDs

Missing the RMD Deadline

This one sounds simple, but it trips up more people than you'd think. Once you turn 73, your RMD deadline is December 31 of each year. Miss it, and you're looking at that steep 25% penalty on whatever you failed to withdraw: plus you'll still owe ordinary income taxes on the distribution.

Life gets busy. Maybe you're spending time on the Treasure Coast enjoying retirement, traveling, or simply not thinking about tax deadlines during the holidays. But December 31 waits for no one.

Pro tip: Set a calendar reminder for early November. This gives you plenty of buffer time to contact your custodian, calculate your RMD, and process the withdrawal before the year-end rush.

Minimalist calendar and hourglass highlighting December 31 RMD deadline for retirees in 2026

The First-Year RMD Trap

Here's where things get tricky. For your first RMD, you actually have a choice: you can take it by December 31 of the year you turn 73, OR you can defer it until April 1 of the following year.

Sounds great, right? Extra time!

Not so fast. If you defer that first RMD to April 1, you'll be required to take two RMDs in the same calendar year: your deferred first one AND your regular second-year distribution. That double withdrawal can create a tax nightmare:

  • It could push you into a higher tax bracket
  • It might trigger increased Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amount)
  • You could lose certain deductions that phase out at higher income levels

For many Stuart retirees, taking that first RMD in the year you turn 73: even though you don't have to: is often the smarter move. It spreads out your tax liability instead of bunching it up.

Getting Tax Withholding Wrong

When you take an RMD, your custodian will typically withhold 10% for federal taxes. Here's the problem: 10% is almost never the right amount.

If you're in a higher tax bracket (and many retirees are surprised to find they still are), you could owe significantly more when you file your return. On the flip side, if you over-withhold, you're essentially giving the IRS an interest-free loan.

Neither scenario is ideal.

The solution is to work with a financial advisor or tax professional to estimate your actual tax liability and adjust your withholding accordingly. At Davies Wealth Management, we help clients in Stuart and across Florida coordinate their RMD strategy with their overall tax picture: because one size definitely doesn't fit all.

Financial calculator, coins, and tax forms representing accurate RMD tax withholding strategies

Ignoring the Ripple Effects on Your Tax Return

This might be the most overlooked RMD mistake of all. Your RMD doesn't exist in a vacuum: it affects your entire tax return in ways you might not expect.

Higher RMD income can:

  • Increase your Medicare premiums through IRMAA surcharges (we've covered this topic extensively on the 1715 The Commute with Thomas Davies podcast: definitely worth a listen if you want to dive deeper)
  • Eliminate or reduce deductions you were counting on, including the enhanced standard deduction for taxpayers 65 and older
  • Push you into a higher tax bracket, making every additional dollar more expensive
  • Affect the taxation of your Social Security benefits, potentially making up to 85% of your benefits taxable

This is why RMD planning isn't just about taking a withdrawal: it's about understanding how that withdrawal interacts with your entire financial picture.

Skipping Qualified Charitable Distributions

If you're charitably inclined (and many folks here in Stuart are), you might be leaving money on the table by not using Qualified Charitable Distributions, or QCDs.

Here's how they work: Instead of taking your RMD as taxable income and then donating to charity separately, you can direct up to $105,000 per year (the 2024 limit, adjusted for inflation) straight from your IRA to a qualified charity. The distribution counts toward your RMD but doesn't show up as taxable income on your return.

The benefits add up fast:

  • Lower adjusted gross income (AGI)
  • Potentially lower Medicare premiums
  • You still get to support causes you care about
  • Reduced future RMDs (since your account balance decreases)

QCDs are one of the most powerful: and underutilized: tools in retirement tax planning. If you're already donating to charity, there's really no reason not to explore this option.

Hands exchanging a heart symbol illustrating qualified charitable distributions in retirement planning

Reinvesting RMDs the Wrong Way

Let's say you take your RMD but don't actually need the money for living expenses. Great problem to have! But what you do next matters.

Many retirees simply reinvest that RMD into a regular taxable brokerage account. While there's nothing inherently wrong with this, it creates additional tax consequences down the road:

  • Dividends and interest become taxable each year
  • Capital gains taxes apply when you sell investments
  • Your heirs may face a larger taxable estate

Instead, consider whether a Roth conversion strategy might make sense for your situation. Or explore other tax-efficient investment vehicles. The point is to think strategically about where that money goes after it leaves your retirement account.

How to Stay on Track with Your RMDs

Avoiding these mistakes isn't rocket science, but it does require some intentionality. Here's a quick checklist to keep you on track:

1. Know your deadlines. First RMD: December 31 of the year you turn 73 (or April 1 of the following year, but remember the trade-offs). All subsequent RMDs: December 31 each year.

2. Calculate accurately. Your RMD is based on your account balance as of December 31 of the prior year, divided by a life expectancy factor from IRS tables. If you have multiple traditional IRAs, you can take the total RMD from any one or combination of them: but 401(k)s must be calculated and withdrawn separately.

3. Coordinate with your tax plan. RMDs are just one piece of your retirement income puzzle. Make sure you're looking at Social Security timing, pension income, investment withdrawals, and tax bracket management together.

4. Review your estate plan. RMDs can affect your legacy goals, especially with the changes to inherited IRA rules. If you haven't reviewed your estate plan recently, now's the time.

5. Work with a professional. A good financial advisor doesn't just calculate your RMD: they help you see how it fits into your bigger picture. At Davies Wealth Management, we work with retirees throughout Stuart and the Treasure Coast to build comprehensive retirement strategies that minimize taxes and maximize peace of mind.

The Bottom Line

RMD mistakes are expensive, but they're also preventable. Whether you're approaching 73 or already navigating annual distributions, taking a proactive approach to your required withdrawals can save you thousands in penalties and taxes over your retirement.

If you're not sure whether you're making one of these common mistakes: or if you just want a second set of eyes on your retirement income strategy: reach out to the team at Davies Wealth Management. We're right here in Stuart, and we'd love to help you keep more of what you've worked so hard to save.