A common question we get every year is, “When should I take my RMD?” Those of you who will be 70 ½ this year will need to take your first “RMD”. You may have been taking distributions before now, but the requirement now is a percentage (based on your age) as a minimum “RMD” of the 12/31 balance from the previous year.
So, when do you take the RMD? The law says that it can be any time during the calendar year, BUT if if is your first RMD for age 70 ½, you may wait until April 1st of the following year. If you do that you must still take a RMD for the following year as well. For most of us it is wise to take the RMD in the year we turn 70 ½, but if you work during the year you turn 70 ½ it could be to your advantage to wait until the following year when your income could be lower.
Now we know when the law says we must take it RMD, but when during the year should it be taken? The best answer is, “It depends.” If you don’t need the distribution you don’t have to worry about taking it immediately and can wait until the very end of the year. However, if you will need the income for the year, then you need to determine when during the year it should be taken. If you need it in January then it’s pretty clear. However, if you don’t need it until property taxes or other major expenses are due, then you may choose to wait.
Here is a simple way to think about “when”. If the stock market ended the year on a high note then it may be wise to go ahead and take the distribution early in the year to capture the gain and harvest from growth. If the market ended the year on a low, then you may choose to wait for some growth during the year if you can.
Today, with the market near an all-time high, it could be a winning strategy to take your RMD now.
The second thing to consider is from which IRA account should my RMD come? For IRA’s, you may take the sum of all your RMD’s from a single IRA rather than have to take from each IRA. This provision does not apply to a 403b or 401k. It only applies to IRA’s. For example, it you have three IRAs and one had a very good year and the other two didn’t do as well, then it could be wise to take the sum from the account that did the best (“sell high”) rather than taking rom the accounts that did not do so well (“selling low”).
Ask us for help if you have any questions or want to discuss your RMD requirement.