I believe the penalty is 50% of the amount you needed to take out that particular year, i.e. not the whole balance.
The rationale behind it is a combination of denying passing of assets to descendants and “get the money in the economy”. The former is a big libtardian progressive goal, your “assets” should go back into the “pool” when you die and inherited wealth is “evil”.
I suppose that better worded would not be “why a penalty?”, but why such a drastic penalty?
The whole economy rational is nuts - money in the account IS in the economy, normally, being invested by the retirement account management, etc.
In the case I speak of, said relative is in their 80’s and somehow never a cent was taken out, that I can find. But, the records at the investment management company (TIAA-CREF) only go back 7 years. I cannot even figure out how this happened, and TIAA-CREF doesn’t either. The relative was fairly sharp on finances back in their 70’s, so it all makes even less sense... Barring some sort of negotiation with IRS, half of the entire acct. will go to IRS, and (barring death soon) there will be one more person with care paid by the gov’t., instead of from their assets.