Retirees, Should You Take RMDs Early in the Year or Wait?

Within a given year, is there any advantage to taking your required minimum distributions as soon as you can, or taking it down to the wire and pulling the distribution in late December? Or is it better to take monthly or quarterly withdrawals?

Here are three timing approaches to consider, along with the pros and cons of each.

Option 1: Wait until year-end

Why consider it: It’s not a huge advantage over a lifetime of savings, but the main advantage of delaying until later in the year is a bit of extra tax-deferred compounding.

Assume 75-year-old Anne’s IRA totaled $1 million at the end of 2025, translating to a 2026 RMD amount of $40,650. If she took out and spent her RMD at the beginning of 2026 and the money remaining in her account subsequently earned 12% for the year, she’d have $1,074,472 in the IRA at year-end 2026. If she delayed the RMD until year-end 2026, and her full $1 million was earning 12% during the year, her IRA would be worth $1,079,350 at year-end 2026, after the $40,650 distribution, meaning more money in place for the year ahead.

That’s the story of any money that is invested for tomorrow (and gains in value) versus spent today, however. And there’s the potential for returns to break the other way. If her account lost 12% in 2026, she would have been better off taking out her RMD early rather than risking a larger sum in the market and taking her withdrawal later on. But because stocks and bonds more frequently gain in value than they lose, the benefits of an additional year of compounding can add up.

For retirees who are reinvesting some or all of their RMDs in a taxable account rather than spending, the sole benefit of delaying RMDs is to have an additional year to take advantage of the tax deferral afforded by the IRA wrapper.

Why avoid it: Those tax-deferred compounding benefits may not be a big deal for smaller investors. The post-RMD period is usually shorter than the accumulation period; the shorter the time frame, the less the compounding benefit. Plus most retirees’ portfolios are more conservative, and therefore lower-returning, than accumulators’, so the compounding and/or tax-deferral of delaying may not be extreme.

Delaying can heighten the risk of  missing a distribution and having to pay a penalty. Also, if you die late in the year, before taking your RMD, your heirs have a tight window to take RMDs from the account.

Finally, if you want to convert any IRA assets to Roth, you’ll need to take your RMDs before a conversion.

Option 2: Take as soon as possible

Why consider it: To ensure you don’t forget and risk a penalty and to avoid a tight window for heirs if you die. Taking an RMD early in the year frees you up to do an IRA conversion later. If a retiree is pulling RMDs for living expenses but the IRA subsequently drops in value throughout the year, she’d have been better off taking the money out earlier, leaving less money at risk of losses.

Why avoid it: There might be forgone tax-deferred compounding opportunities. Moreover, in particularly bad market environments, Congress might vote to not require RMDs in a given year, but this is extremely rare.

Option 3: Space throughout year

Why consider it: Taking distributions semiannually, quarterly, or monthly helps ensure that you receive a range of prices for the assets you sell. Taking RMDs in installments guarantees that you’ll never sell at precisely the right or wrong time. A retiree taking RMDs in installments would retain some, but not all, of the benefits of tax-deferred compounding afforded the retiree who takes a year-end distribution.

Most financial providers have RMD services that calculate and disburse installment amounts on the schedule you dictate: monthly, quarterly, or semiannually. The other big advantage of installments is that it helps ensure regular cash flow from your portfolio.

Why avoid it: If you’re taking RMDs manually throughout the year, rather than relying on your investment provider’s service, there’s a risk you could miscalculate or fail to take all of your distributions.

This article was provided to The Associated Press by Morningstar. For more retirement content, go to https://www.morningstar.com/retirement.

Christine Benz is director of personal finance and retirement planning for Morningstar and co-host of The Long View podcast.