Should I take my RMD early in the year or wait until the end of the year?
It is June and I have not taken my RMD. Should I let the funds grow until end of the year or take average withdrawals until end of the year?
While you may wish to time the receipt of your RMD to coincide with necessary cash flow to meet certain bills, you certainly do have a choice of when to take your distribution. Not sure what you mean by "take average withdrawals until the end of the year".
All other things being equal, I prefer to shelter the income and capital gains within the IRA vehicle as long as I can, thus, we often wait until the middle of December each year to push out our clients' RMDs. This also is good timing for holiday spending, so it works well both ways.
Be sure not to wait until the last few days in December, however, as the penalty for NOT taking your RMD distribution by 12/31 of any year is a whopping 50% of the amount you should have taken. There is often a bevy of activity at year end with trades, etc. and less-than-reliable mail service, so do allow yourself a couple of weeks to accomplish this task and ENSURE that the funds are distributed from the IRA. A word of caution here...IF you are ever close, or worried, simply ask the custodian to transfer the RMD funds into another account at that same custodian, if you have one, and that generally only takes 1-2 days. So, for example, if you have both an IRA and a taxable investment account with TD Ameritrade, just transfer the requisite RMD funds from the TD Ameritrade IRA to your TD Ameritrade taxable account, rather than having them cut you a check.
Finally, IF you may be routing your RMD directly to a charity or charities, you MAY wish to make the distributions earlier in the year, in order to benefit the charity sooner rather than later. So, again...it all depends.
As long as you take your RMD before December 31st, it doesn’t make much of a difference whether you wait until the end of the year or do it in the beginning of the year. It really depends on your situation; if you will need the money then you might want to take it. Otherwise, you could leave it in your portfolio longer, but there is no guarantee the money will grow.
You can choose to take your RMD at any time of the year as long as it is taken by Dec. 31st. A lot of people choose to have it automatically taken out at the same time each year. The RMD calculation is based on the account value at the end of the prior year. Depending on the RMD amount, you may wish to take it when your account value is larger.
For informational purposes only. Not to be considered investment, tax, or legal advice.