Meeting Your First RMD Deadline
If you turned 70½ last year, you had the option to delay your first required minimum distribution until April 1 of this year. Fair warning: That's a Saturday, so don't wait until the last minute.
Question: I turned 70½ last year, but I haven't taken the required minimum distribution from my IRA yet because I knew I could wait until April 1 of this year. Because April 1 is on a Saturday, do I have until Monday, April 3, to take the distribution? Will I need to take another RMD by December 31 this year?
Answer: Even though the IRS is extending the April 15 deadline for filing your tax return to April 18 this year because of the weekend and a Washington, D.C., holiday, you don't get a similar extension for taking your required minimum distribution. If you turned 70½ in 2016, you have to take your first RMD by April 1, 2017, if you haven't already withdrawn the money. Otherwise, you'll pay a penalty of 50% of the amount of money you should have withdrawn but didn't.
Because the deadline falls on a Saturday, when the stock market is closed, don't wait until the very last minute to take your withdrawal. Maura Cassidy, vice president of retirement for Fidelity Investments, recommends completing the withdrawal on or before March 31. If you have to sell investments to take the RMD, allow even more time because it can take up to three days for stocks, mutual funds and ETFs to settle.
And you're right that if you delayed taking your first RMD, you will also have to take the one for age 71 by December 31. That can boost your adjusted gross income and may bump you into a higher tax bracket, or it could make you subject to the Medicare high-income surcharge if your AGI (plus tax-exempt interest income) ends up being more than $85,000 if single or $170,000 if married filing jointly. One way to shelter your required withdrawal from your AGI is to make a tax-free transfer from your IRA to a charity. If you're 70½ or older, you can transfer up to $100,000 per year to a charity from your IRA, which counts as your required minimum distribution but isn't included in your adjusted gross income.
For more information about RMDs, see 10 Things Boomers Must Know About RMDs From IRAs.