Don't Make This Costly RMD Mistake in Retirement

Blowing the timing of your first required minimum distribution can cost you a bundle.

After you turn 70½, you need to start taking required minimum distributions from your 401(k)s and traditional IRAs. The exact amount is based on the balance in your retirement accounts as of December 31 of the previous year and your life expectancy according to the IRS.

You generally need to take your RMD by December 31, but the deadline for your initial RMD is extended until April 1 of the following year. This is where some retirees fall into a trap.

If you wait until April 1 of the following year to take your first RMD, you’ll have to take your second RMD by the end of that same year, too. Taking two RMDs in the same year could bump you into a higher tax bracket. It could also make you subject to the Medicare high-income surcharge or cause more of your Social Security to be taxable.

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Consider your tax situation carefully before delaying that first RMD, and don’t forget to take the second one on time. Otherwise, you could face a tax penalty of 50% of the amount you should have withdrawn.

There’s a lot more you need to know about RMDs. Kiplinger's special report on required minimum distributions can help.