Q: I turned 70 1/2 years old in August of this year, so I'll need to take my first required minimum distribution (RMD) from my 401(k) by April 1, 2019. Would I be better off waiting or taking it now?
According to current law, you have until April 1 of the year following the year in which you turn 70 1/2 to take your first RMD. And it may seem like a smart idea to wait until the last possible minute if you don't need the money.
There are certainly some good reasons to think this. Not only will your RMD withdrawal be considered taxable income, but the longer you wait, the longer you can take advantage of the tax-deferred growth potential of your retirement account.
However, there's one big reason why it's generally better to take your first RMD during the calendar year in which you turn 70 1/2: You'll also need to take your second RMD before the end of 2019 -- the April 1 rule only applies to your first RMD. So if you wait as long as possible to take your first one, you'll end up taking two RMDs in the same calendar year.
This means that you'll have twice the taxable income from retirement accounts. This can easily catapult you into a higher tax bracket and result in a much larger tax bill than you'll have if you take your first RMD before the end of 2018.
I'd suggest checking with a tax professional regarding your personal situation, but in most cases, it's better to take RMDs in separate calendar years.
