Delaying Your First RMD? Here's Why That Move Could Backfire.

There are benefits to saving for retirement in a traditional 401(k) or IRA -- namely, the fact that you get to contribute pre-tax dollars, and that gains in your account are tax-deferred. But these accounts come with a major drawback later on -- required minimum distributions, or RMDs.

RMDs begin at age 73 or 75, depending on your year of birth. And they could drive up your taxes substantially during retirement.

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RMDs are typically due by Dec. 31 each year. But there's an exception when it's your first one. You're allowed to delay your initial RMD to April 1 of the year following your 73rd or 75th birthday (whichever year RMDs start for you).

That gives you a little more leeway, which probably sounds like a win. But you should know that delaying your first RMD could come with an unexpected downside.

Why delaying your first RMD isn't necessarily a smart move

At first, a delayed RMD might sound great. You get to keep your money in your IRA or 401(k) for longer, allowing it to grow a bit more on a tax-deferred basis.

But one thing you should know is that if you delay your first RMD until the following April, you'll still have to take your second RMD by Dec. 31 of that same calendar year. In other words, you'll be required to take two distributions in the same year, which could lead to a pretty notable tax bill.

The impact doesn't necessarily stop there, though. Not only are RMDs taxable, but they could drive your income up to the point where there are other consequences.

For one thing, whether you're taxed on your Social Security benefits or not hinges on your adjusted gross income (AGI). RMDs count toward your AGI. If you have to take two of them within the same year, you increase the risk of having to pay taxes on Social Security benefits, since the thresholds at which those taxes apply are pretty low.

Granted, the new $6,000 senior tax deduction may give you a little more leeway with those taxes. But if your RMDs are sizable and you have two to take in one year, you should prepare to see your Social Security benefits taxed.

Secondly, if having to take two RMDs in the same year raises your AGI substantially, you could be looking at surcharges on your Medicare premiums. Higher-income enrollees have to pay income-related monthly adjustment amounts, or IRMAAs, which apply to both Medicare Part B and Part D.

Now the thresholds at which IRMAAs take effect are higher than the thresholds for taxes on Social Security benefits. But if you're looking at large RMDs, you can't write off IRMAAs -- especially if you have to take two mandatory withdrawals in the same year.

Careful planning is key

For some retirees, Roth conversions ahead of RMD age are a great way to avoid those mandatory withdrawals. But those aren't always easy to pull off, since they're a taxable event. In doing conversions, you could end up swapping a future tax burden for one you have to deal with sooner.

If you're stuck taking RMDs, it's important to plan for them carefully so you don't end up with a larger financial headache than anticipated.

Get an estimate of your first and second RMD, and see what the impact might be by taking both in the same year. You may realize that taking your first RMD the year you turn 73 or 75 is a smarter move, even if it means facing a tax bill sooner and losing out on a few months of tax-deferred growth in your retirement account.

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