Avoiding Costly Retirement Mistakes: How to Fix Errors Before They Derail Your Savings

Retirement planning is complex, and even seasoned savers can stumble. Missing your required minimum distribution (RMD) can trigger a 50% penalty on the amount not withdrawn, a shock that can erase years of savings growth.

Fortunately, the IRS offers penalty waivers if you file Form 5329 with a reasonable cause explanation. Acting quickly and documenting your situation can save you thousands.

Excess IRA contributions are another common mistake. If not withdrawn by the tax filing deadline, they incur a 6% excise tax each year they remain. Correcting these promptly avoids ongoing penalties.

Prohibited transactions, such as borrowing from your IRA or self-dealing, can disqualify your account, causing immediate taxation and penalties. Awareness and prevention are key.

Life’s unexpected events—divorce, bankruptcy, or emergencies—may complicate your retirement finances. Special provisions, like those introduced during the COVID-19 pandemic, provide temporary relief in some cases.

By staying informed and acting swiftly, you can correct mistakes before they become disasters, protecting your retirement security.