Investing Specialists

When's the Right Time to Take RMDs?

Christine Benz

For affluent retirees, "right time" and "RMDs" (required minimum distributions), don't belong together in the same sentence.

If you're past age 70 1/2, those withdrawals have to start coming out of your tax-sheltered retirement accounts--traditional IRAs and 401(k)s, as well as Roth 401(k)s--in the year following the year in which you attain age 70 1/2. If you don't take them on schedule--by April 1 of the year following the year you turn 70 1/2 and by year-end of each year thereafter--you'll face a penalty of 50% of the amount you should have taken and didn't. (Plus, you'll still owe ordinary income taxes on the money, as you would with any IRA distribution.)

Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.