With the new year comes a new required minimum distribution (RMD) amount for owners and beneficiaries of tax-deferred retirement accounts. The amount resets annually based on the previous year’s ending balance, and by now, custodians and advisors have calculated this year’s RMDs for their clients. But when during the year does it make sense to take one’s RMD? It’s an important question and the answer is highly situation dependent.

Many choose to take their RMD ratably each month to fund everyday lifestyle expenses. If that’s your approach, be sure to update your monthly transfers to reflect this year’s new amount. Others prefer to take their entire RMD in December, often using the funds to cover holiday expenses. Still others, opt for sporadic withdrawals for lump cash needs or for qualified charitable donations (QCDs), which prevent additional taxable income while supporting worthwhile causes.

There is no one-size-fits-all strategy—what matters most is ensuring that your RMD is fully satisfied prior to the appropriate deadline. For most individuals, that deadline is December 31.  Failing to meet it could result in significant penalties. Planning ahead and coordinating with your financial advisor can help you avoid any undesirable results.

For beneficiaries who inherited a retirement account after 2019 and are subject to an RMD within the mandatory 10-year distribution window – the original account owner was already in RMD status – please note an important update for this year. Beginning in 2025, the IRS will be actively enforcing the RMD requirements for these accounts. So, if this applies to you, make sure you understand your obligations and are taking the necessary distributions to avoid any penalties.

Understanding the RMD landscape can be tricky, with rules that may seem confusing at times, but it’s essential to get it right. If you have any questions about your RMD, want to review your RMD strategy, or simply want to ensure you’re on the right track, please don’t hesitate to reach out to us at 847-495-2464 or info@trifectacapitaladvisors.com.