Excess Accumulation Penalty

For those hoarders whose homes become crowded hovels packed with trash and stacks of National Geographics going back to the 1950s, the excess accumulation penalty can involve getting trapped under under some junk and slowly starving to death.

For everyone else, it’s a tax penalty levied by the IRS if withdrawals aren’t made from certain retirement accounts.

Some methods of saving for retirement (simple IRAs being the most well-known) require that a certain amount of the accumulated funds get distributed every year once the beneficiary reaches a certain age (70 1/2 in the case of the IRA). If the money isn’t paid out, the funds become subject to the serious accumulation penalty.