One of the biggest advantages of saving for retirement in an account like an IRA or 401(k) is that you can defer your taxes. Instead of paying a big tax bill upfront, you can wait to pay taxes until you're in retirement. That can give you more money to invest today.

But eventually, the government comes asking for its tax revenue. That's why it imposes required minimum distributions. Seniors must start withdrawing funds from their retirement accounts and pay taxes on those withdrawals.

If you don't know all the rules for required minimum distributions, it could result in some stiff penalties. Failing to make a required minimum distribution on time could result in a penalty equal to 25% of the amount you were supposed to withdraw. Plus, you still have to make the withdrawal and pay regular income taxes.

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Source Fool.com