Taking Your First Required Minimum Distribution (RMD)? Here's What You Need to Know Before the New Year.

If you saved diligently during your career to build up your nest egg, you might have quite a bit of savings in your IRA or old 401(k). With the strong returns in the stock market of the last decade, any withdrawals you've made to fund your retirement might have been outweighed by the gains in your investments. However, anyone who turned 73 in 2025 will soon have to take their first required minimum distributions (RMDs), if they haven't already done so.

Missing an RMD can result in significant penalties. You could owe the government up to 25% of the amount you were supposed to withdraw. Plus, you'll still have to make the withdrawal and pay income taxes on it anyway. Therefore, it's best to ensure you are aware of your deadlines and the amount you need to withdraw. If you're about to take your first RMD, here's what you need to know before the start of 2026 to make the best possible decision for your finances.

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How much is your first required minimum distribution?

Your first required minimum distribution is primarily determined by the value of your retirement account at the end of last year. You can look that up in your brokerage statements. That amount is divided by a life expectancy factor as determined by the age you turned (or will turn) this year, which should be 73 for those taking their first RMD. The IRS publishes the life expectancy factors in Publication 590-B.

The uniform life expectancy factor for a 73 year old is 26.5. So, for every $100,000 in your retirement account at the end of 2024, you'd be required to withdraw $3,774 ($100,000 divided by 26.5) for your first RMD for the year 2025. Most brokerages will do the calculation for you.

Note: If your spouse is more than 10 years younger than you and is the sole beneficiary on your account, you'll use a joint life expectancy factor based on both of your ages.

Another important detail is that RMDs for IRAs are separate from RMDs for workplace retirement accounts. If you have money in both types of accounts, you'll need to be sure to take distributions from both types of accounts to satisfy the requirements.

You have some extra time, but it might not be worth taking

For those who turned 73 in 2025, you have until April 1, 2026 to take your first required minimum distribution. That rule applies every year, giving seniors a few extra months to ensure they get RMDs set up properly across all their accounts. However, subsequent RMDs are due by Dec. 31 of each year.

This means that if you delay your first RMD until 2026, you'll have to take a second RMD next year as well. That can have some big tax consequences, since any distribution from your pre-tax retirement accounts is taxed as ordinary income.

Those distributions will also increase your adjusted gross income, which could increase the amount of taxes you pay on Social Security benefits. It could also increase the amount you pay for Medicare premiums. And if you have savings outside of your retirement accounts, it could increase the taxes you owe on capital gains from your brokerage accounts.

That said, if you've continued working in 2025 and are finally retiring in 2026, it might make sense to defer your first RMD to next year. Be sure to look at how much you have to distribute from your accounts, and determine whether it'll save you money to take your distribution now or later.

When's the best time to take your required minimum distribution?

There are a couple of schools of thought on the best time to take an RMD. Some suggest withdrawing the money early in the year, while others advise waiting until late in the year.

The argument for taking distributions early in the year is that you will reduce the amount left in the account throughout the rest of the year that will continue growing. This strategy can reduce your future RMDs, and it works particularly well for retirees who have excess savings in their retirement accounts and intend to reinvest their RMDs in a taxable account for years to come.

The argument for taking RMDs late in the year is that it allows your investments to continue growing tax-free, maximizing the potential value of your retirement accounts. This strategy works well if you're primarily spending everything from your RMDs on living expenses.

An added benefit of taking your RMD late in the year is that it allows you to do some more advanced tax planning before taking your RMD. If you want to make qualified charitable distributions throughout the year, it might make sense to wait to take a distribution for yourself. You can also use the RMD to pay taxes on other income through withholdings from your brokerage.

When you take your RMD isn't set in stone. Just because you take it late this year doesn't mean you can't take it early next year. It's best to take it whenever's most convenient for you, as long as it's before the deadline.

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