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

I’ve written before about how people who are subject to required minimum distributions from traditional tax-deferred accounts can use their RMDs to correct imbalances and other problem spots in their portfolios. For many RMD-subject investors today, for example, trimming US equities to meet RMDs is a way to curtail risk in the portfolio while also meeting the IRS’ rules.

But what about RMD timing? Your RMD for a given year is effectively “cooked” by Dec. 31 of the previous year. For 2026 RMD-takers, for example, their RMD amount will depend on their tax-deferred portfolio balance at the end of 2025. So even if your portfolio declines in value in 2026, lessening your traditional tax-deferred balance, your RMD amount will still depend on that year-end 2025 balance.

But within a given year, is there any advantage to taking your RMD as soon as you’re able to, or taking it down to the wire and pulling the distribution in late December? Or is it better to be systematic about it, taking monthly or quarterly withdrawals that equate to the RMD amount?

Here are the three timing approaches that RMD-subject retirees could 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.

Let’s use a simple, single-year example to illustrate how waiting can pay off. 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 this year 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, on the other hand, 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. (The above illustration doesn’t take into account any taxes she’ll owe on her RMDs, but since the RMD amount is the same, and the tax year is the same, RMD-related taxes won’t affect the general finding.)

That’s the story of any money that is invested for tomorrow (and gains in value) versus spent today, however. And of course, there’s the potential for returns to break the other way. If her account lost, rather than gained, 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. If Anne doesn’t need the RMD money to live on and plans to reinvest her RMDs in a taxable account, she’d obtain an additional year of tax deferral by leaving money inside the tax-deferred wrapper. In contrast with a plain-old taxable brokerage account, she won’t be liable for any income or capital gains distributions that her holdings kick off as long as the money stays within the IRA. For example, let’s say Anne took her RMD early in 2026 and invests her RMD in a taxable account that also earns 12%. But because she’s in a taxable account, she incurs a tax-cost ratio of 1%, bringing her aftertax return to 11%. Owing to the drag of taxes on her taxable account, her total net worth would be slightly behind what it would have been if she had let the money sit in the IRA for the full year, earning 12% without any tax levy, before taking her distribution.

Why avoid it: Those tax-deferred compounding benefits could add up for very wealthy retirees but may not be a big deal for smaller investors. For one thing, the post-RMD period is usually shorter than the accumulation period; the shorter the time frame, the less the compounding benefit. It’s also worth bearing in mind that most retirees’ portfolios are more conservative, and therefore lower-returning, than accumulators’, so the compounding and/or tax-deferral opportunity afforded by delaying may not be extreme.

The other big disadvantage of delaying is that year-end gets busy; delaying RMDs can heighten the risk of missing a distribution and having to pay a penalty. Another risk, especially for older retirees, is that if you die late in the year, before taking your RMD, you could be leaving heirs with a tight window to take RMDs from the account.

Finally, waiting isn’t advisable if you think you want to convert any of your IRA assets to Roth, because you’ll need to take your RMDs before undertaking a conversion.

Option 2: Take As Soon As Possible

Why consider it: The big benefit to taking RMDs as soon as possible is to ensure that you don’t forget and risk a penalty. That also removes the possibility that you would leave your heirs with a tight window to take RMDs if you died. If an IRA conversion is on your radar, taking an RMD early in the year frees you up to do that later on. Additionally, as discussed above, 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. Finally, if you use your RMDs to address problem spots in your portfolio—pulling withdrawals from your most appreciated assets, for example, to aid in rebalancing—it’s best to make those adjustments as soon as possible.

Why avoid it: There might be forgone tax-deferred compounding opportunities, as outlined above. Moreover, in particularly bad market environments like March 2020, Congress might vote to not require RMDs in a given year. Retirees who took their RMDs early may have to jump through some hoops to get the funds back into their accounts.

Option 3: Space Throughout Year

Why consider it: Taking distributions semiannually, quarterly, or monthly, with those distributions equaling the full-year RMD amount, helps ensure that you receive a range of prices for the assets that you sell. Just as dollar-cost averaging ensures that you never buy at the precisely right or wrong time, 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.

While it might seem logistically more difficult to take multiple RMDs throughout a given year, 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 receiving RMDs in installments is that it helps ensure regular cash flow from your portfolio. If you’re paying quarterly estimated taxes throughout the year, taking intrayear distributions can also help you sync your withdrawals with your tax payments.

Why avoid it: There aren’t major drawbacks to taking RMDs in installments, but 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. In addition, depending on the service your provider offers, you may not be able to engage in the sort of surgical RMD-taking that can enhance returns and reduce risk.