Well yes, it is that time, again ….
December 31 was the marker for determining the value of one’s tax-deferred retirement funds and calculate your RMD. So why not do it immediately at the start of the new year?
Time
Yes, you can withdraw the Required Minimum Distribution any time during the calendar year following each December 31 (except your first year gives you some extra time). But since you can withdraw the money any time during the calendar year, you will gamble when is the best time.
It would be nice to know what the future holds so as to take the distribution at the opportune time. But since no one really knows what will happen, and guessing is a waste of time and energy, I do what is best for me: as soon as the year is over, I calculate my RMD, and withdraw the funds immediately.
When I say ‘immediately,’ I mean it. I usually determine the total of the tax-deferred accounts on January 1 or 2 by logging into the custodian’s website. Then I use the IRS’ worksheet to determine the RMD amount. Then I log back into the accounts’ custodian’s website, and initiate the distribution. That means I will get the RMD credited to my bank account within the first week of the year. From there, I determine what to do with it. Some goes into savings, some goes into investments.
Once that is done, I do not need to think about RMD again until the following new year. No need to fret as to when is the best time, because the best time for me already happened. No need to get into a situation where I would worry that I might might forget the deadline.
As you know, the penalty for not taking one’s RMD is supremely heinous. Where else would one encounter a fine of 50% of the amount due? So in addition to needing to take the missed RMD, one is fined a 50% tax for forgetting. So I do my RMD withdrawal at beginning of the new year, and be done with it.
When
In the past, I had recommended doing monthly withdrawals to spread out the risk of market volatilty, I subsequently changed my opinion. I now withdraw the full RMD amount at te earliest possible time in January. as mentioned.
What is your RMD plan? Let me know here.
Portrait of a lady wearing a man’s turban is by Hunhar II, mid-1700s. Courtesy Minneapolis Institute of Art.
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