If you're 73 or older, then you're no longer in full control of your retirement savings. The federal government requires you to take annual withdrawals known as required minimum distributions (RMDs) from some of your accounts or face a costly tax penalty.
You have until at least Dec. 31 to pull this off for 2026, but you might be wondering whether you should get your RMD out of the way now so you don't have to think about it anymore. That's an option, but it's worth weighing the pros and cons before you decide.
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Why you may want to take your 2026 RMD now
Taking your 2026 RMD now could make sense if you're worried you might forget to take it closer to the deadline. If you fail to take your RMD as scheduled, you'll pay a 25% penalty on the amount you didn't withdraw. This will likely cost you more than you would've paid in taxes had you just taken your RMD when you were supposed to.
Taking your RMD early could also make sense if you expect a recession might hurt the value of your investments in the coming months. If you wait until later and your investments have dropped, you'll have to sell a larger portion of your assets to meet the RMD. That would leave you with fewer investments to cover your costs in future years.
Why you may want to wait to take your 2026 RMD
On the other hand, if you expect your investments to do well throughout 2026, you may want to wait until later in the year to take your RMDs. This way, the money remains invested for longer.
Of course, there's no way to know exactly what the stock market will do, so some people prefer a middle ground. For example, you could divide your RMD amount by the number of months remaining in the year. Then, take out a little each month rather than making one large withdrawal.
You don't have to take RMDs from all your accounts
Keep in mind that you don't have to take RMDs from Roth 401(k)s or Roth IRAs. You also don't have to take an RMD from your current 401(k) if you're still working and own less than 5% of the company. In that case, you can wait until the year after the year you retire to begin taking RMDs from that 401(k).
If you have any questions about which accounts you need to take RMDs from or how much you need to withdraw, consult with a tax professional who can give you personalized advice.
