Excess-Accumulation Penalty

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Excess-Accumulation Penalty

A 50% tax that one must pay if one neglects to take the required minimum distribution from one's IRA. The required minimum distribution is the portion of an IRA that must begin to be distributed to an annuitant by the age of 70.5 or the date of retirement, whichever comes later. The amount of the minimum required distribution is determined by the value of the IRA, the length of time the annuitant has contributed, and the amount of contributions. In any case, the excess accumulation penalty exists in order to prevent an IRA from becoming unfairly valuable during the annuitant's retirement. See also: Excise tax.