What is the penalty for failing to withdraw any required minimum distributions from a traditional IRA?

The penalty for failing to withdraw any required minimum distributions (RMDs) from a traditional IRA is indeed 50% of the amount that should have been withdrawn. This substantial penalty is imposed to encourage account holders to start depleting their retirement accounts as intended, ensuring that funds are eventually taxed.

When individuals reach the age of 72 (or age 70½ if they reached that age before January 1, 2020), they are required by law to begin taking distributions from their traditional IRAs. If they fail to take out the required amounts, the IRS assesses a penalty of half the amount that was supposed to be withdrawn but was not. This punitive measure serves as a strong incentive for compliance with the RMD requirements, as it can significantly impact the account holder's financial situation.

Consequently, understanding the implications of RMDs and the associated penalties emphasizes the importance of planning and compliance for individuals managing traditional retirement accounts.