This Is the Best Time of Year for Retirees To Take Their RMDs
Written by
Ellie Diamond
Edited by
Levi Leidy
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Keeping funds in a retirement account, such as a 401(k) or individual retirement account (IRA), is a smart way to benefit from compound interest. The longer you go without withdrawing, the more opportunity your funds have to grow.
Once you reach a certain age, however, you may have to take required minimum distributions (RMDs). These often begin at age 73, though holders of workplace-based plans may qualify to delay RMDs until retirement.
The law requires you to take your first RMD by the April after your deadline, and all subsequent RMDs by Dec. 31 of each tax year. Taking your RMD at one time of year versus another can impact your finances.
Early Year Withdrawals: Clarity and Flexibility
Some financial professionals advise taking your RMDs earlier in the year. Withdrawals from a traditional IRA and 401(k) accounts are taxable as ordinary income. RMD rules apply to these accounts, meaning your taxable income will be at least as much as your distribution.
Taking your RMD early in the year gives you a better idea of your taxable income, allowing you to plan around it. For example, if your RMD is higher than your spending needs, you may decide to make a higher charitable contribution.
Earlier distributions can also protect those funds against market volatility, which has spiked several times in the past few years. The Federal Reserve measured the Volatility Index at 52.3 in April 2025 and 38.57 in August 2024. Anything over 30 indicates high volatility and a likelihood of extreme swings. Taking an earlier RMD is one way you can reduce your risk.
Early distributions can protect against market downturns, but they may also mean missing out on potential value increases. If you withdraw a larger sum in January and your investments grow in June, your account earns less.
Late-Year Withdrawals: Potential Strategic Tax Benefits
Some taxpayers prefer to wait until December to take RMDs. This gives you more time for your savings to grow while potentially offering tax advantages.
Tax Withholding for Easier Planning
Retirement income streams may not automatically withhold taxes, which means retirees often have to pay quarterly estimated taxes. One way to fulfill that requirement is to have your retirement plan administrator withhold the amount you owe from your RMD.
As far as the IRS is concerned, your plan administrator has made these withholdings throughout the year. As long as the amount meets your minimum tax requirement, it can help you avoid penalties.
Late RMDs also make it easier to calculate your charitable contributions. The IRS allows IRA holders to make tax-free qualified charitable distributions directly from their accounts. This strategy may reduce your taxable income.
The Downside: Reinvesting and Roth Conversions
If you take your RMD later in the year, you have less time to reinvest your distribution in a taxable account. You would still pay income taxes on the RMD payout, but those funds can keep earning interest. Provided you keep the money in that account for more than a year, you would pay the capital gains tax on withdrawals. That rate is currently no more than 15% for most taxpayers — less than the tax rate on income above $47,151.
The other major downside is that under current tax rules, you must take an RMD after transferring any funds into a Roth account. These conversions allow for tax-free growth and let your heirs make tax-free withdrawals.
A Third Option: Regular Monthly Payments
If you’re unsure about early or late distributions, consider asking your account administrator for regular monthly payments. You may find that this option makes budgeting and planning easier without significantly affecting your investments.
Overall, there’s no “correct” answer for when to take RMDs. It all depends on your budget, financial needs and wealth goals.
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