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14 September 2026
Required Minimum Distributions (RMDs) and Early Withdrawal Penalties
Susan Reyes, age 73, holds a Traditional IRA with a balance of $400,000 as of December 31st of the prior year, and a Roth IRA with a balance of $150,000 as of December 31st of the prior year. Her current Traditional IRA balance is $420,000, and her Roth IRA balance is $160,000. Using the Uniform Lifetime Table, the life expectancy factor for age 73 is 26.5. Which of the following statements accurately describes Susan's Required Minimum Distribution (RMD) obligations for the current year and the potential penalty if she fails to meet them?
A.Her RMD is $15,094.34 from the Traditional IRA, and failure to take it would result in a 25% excise tax on the undistributed amount.
B.Her RMD is $15,849.06 from the Traditional IRA, and failure to take it would result in a 25% excise tax on the undistributed amount.
C.Her RMD is $5,660.38 from the Roth IRA, and failure to take it would result in a 10% early withdrawal penalty on the undistributed amount.
D.She has no RMD obligation this year since she is over 59½, but any withdrawal from her Traditional IRA would be subject to a 10% early withdrawal penalty.
Rationale:
The correct RMD is calculated using the Traditional IRA balance as of December 31st of the year prior to the RMD year, divided by the applicable life expectancy factor. For Susan, this is $400,000 / 26.5 = $15,094.34. Roth IRAs are not subject to RMDs for the original owner. Failure to take the RMD results in a 25% excise tax on the amount not withdrawn.
The option calculating RMD using the current Traditional IRA balance is incorrect because RMDs are always based on the account balance at the close of business on December 31st of the *previous* year.
The option calculating RMD from the Roth IRA and applying a 10% early withdrawal penalty is incorrect because Roth IRAs are not subject to RMDs for the original owner, and the 10% early withdrawal penalty applies to distributions before age 59½, not to missed RMDs, nor is it applicable at age 73.
The option stating no RMD obligation and applying a 10% early withdrawal penalty is incorrect because at age 73, Traditional IRAs *are* subject to RMDs. Furthermore, the 10% early withdrawal penalty is not applicable to someone age 73, nor is it the penalty for failing to take an RMD.
