Is Taking Your Required Minimum Distribution (RMD) in January a Smart Move?

It's natural to think of your retirement savings as yours when you worked so hard to set them aside. But that doesn't mean you have complete control over the funds. The IRS usually doesn't touch your Roth IRA or 401(k) withdrawals, but it's a different story for tax-deferred accounts, like traditional IRAs and 401(k)s.

These accounts have required minimum distributions (RMDs) -- mandatory annual withdrawals you must make beginning in the year you turn 73. While you technically have until Dec. 31 to take RMDs for the year (or April 1 of the following year for your first RMD), you might consider taking your 2026 RMD immediately in January to get it out of the way.

There are advantages to doing this, but there are also potential drawbacks. Here's what you need to weigh before deciding whether it's the right move for you.

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How to calculate your RMDs

Calculating your RMDs is pretty straightforward. You take your account balance as of Dec. 31 of the previous year -- 2025 if you're talking about your 2026 RMD -- and divide it by the distribution period next to the age you'll be on Dec. 31 of the current year from the IRS Uniform Lifetime Table. The result is your RMD amount for that year.

For example, if you're turning 75 in 2026 and you had $500,000 in a traditional 401(k) on Dec. 31, 2025, your RMD from that account would be $500,000 divided by 24.6, or about $20,325.

Note that you don't have to take any RMDs from Roth accounts or your current employer's 401(k) if you're still working and own less than 5% of the company.

Advantages of taking your RMD in January

The obvious advantage to taking your RMD in January is that you won't forget to make it. Failing to take your RMD results in a 25% penalty on the amount you should have withdrawn. This is almost always more than what you would've paid in taxes on the RMD if you'd just taken it as scheduled.

It could also make sense if you're worried about a recession happening soon. If you wait until later in the year to take RMDs and your portfolio has dropped 20% by then, you'll have to sell more of your assets to fulfill the RMD than you would have if you took the RMD right away in January when your investments were doing better.

Of course, it's not easy to predict what the stock market is going to do next, so it ultimately comes back to your own peace of mind. If you prefer to get your RMD out of the way quickly, it might be the right choice for you.

Disadvantages of taking your RMD in January

Taking your RMD in January means you miss out on the potential earnings you could have had if you'd kept your money invested until later in the year. These additional earnings could be especially important for you if you're worried about running out of savings prematurely.

In this case, you might want to wait until later in the year to take your RMD. Or you could space your distributions out throughout the year. For example, you might decide to make quarterly withdrawals until you've taken your entire RMD.

Again, there is no right or wrong here. What's important is ensuring that you take your full RMD by the end of the year to avoid the tax penalty that comes with not taking it. As long as you do that, the month you actually withdraw the funds doesn't matter that much.

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