If an RMD is missed, what is the reduced tax penalty if correction is made within two years according to the SECURE 2.0 Act?

The reduced tax penalty for a missed Required Minimum Distribution (RMD) correction made within two years, as stipulated by the SECURE 2.0 Act, is 10%. This updated legislation offers a more lenient approach to individuals who may inadvertently overlook their RMD requirements. Before the SECURE 2.0 Act, the tax penalty for failing to take the required distributions was significantly higher, which could lead to heavy financial burdens for retirees.

By allowing a reduced penalty of 10% if the taxpayer corrects the missed RMD within the specified two-year timeline, the SECRURE 2.0 Act provides a relief mechanism that encourages compliance while also recognizing that errors can occur. This adjustment aims to help individuals avoid the drastic consequences of a more severe penalty, making it a more manageable situation for those who need to rectify their RMDs. Thus, the 10% penalty serves as a crucial aspect of the law's broader mission to improve retirement security and simplify the distribution process for retirees.