Many believe it’s better to take their required minimum distribution at the end of the year in order to maximize tax-deferred growth within their accounts. Waiting can indeed provide you with growth if markets are favorable, but that’s not always the case. While on the surface it may make sense to wait, here are ?ve reasons why it might be more bene?cial to take your RMD early in the year.

#1: To mitigate the impact of an unanticipated market drop

If you delay taking your RMD until year-end, you risk being forced to sell investments during a market downturn should markets sour by the end of the year, potentially locking in losses that can have a lasting impact on your retirement portfolio. By taking your RMD earlier, or spreading it out over the course of the year, you may be able to avoid having to sell holdings at inopportune times. This strategy may help preserve the long-term value of your investments and provide greater financial stability. If you intend to wait until year-end, setting the funds aside in a typically stable asset class, such as a money market or bond fund, can help to preserve the funds in case of a market downturn before year-end.

#2: To Maximize your gifting

If you plan to use your RMD as a gift to a loved one or donation to a charitable organization, taking the distribution early in the year can o?er several advantages. It allows recipients to bene?t from the funds sooner, whether by supporting immediate financial needs, funding education expenses or advancing charitable missions. Early gifting can also provide you with peace of mind, knowing your generosity is making an impact throughout the year rather than being delayed by year-end timing or administrative bottlenecks.

#3: To avoid the end-of-year rush

Custodians often receive a rush of RMD requests right at the end of the year, which can sometimes create a processing backlog. If your custodian is unable to issue your RMD due to an oversight or a processing delay, you will likely face logistical hassles and may even be responsible for paying a 50% penalty for not taking your RMD in that calendar year. Requesting your RMD earlier in the year will allow you to avoid this rush and provide you with time to make any necessary adjustments if something is processed incorrectly.

#4: To prevent a headache for your beneficiaries

Should you pass away unexpectedly during the year without having taken your RMD, your beneficiaries will be responsible for the distribution. Not only will they need to navigate this complicated financial process while grieving, but the RMD will increase their income tax liability in the year it’s taken. In addition, if you pass away later in the year, there may not be enough time to establish an inherited IRA and initiate the RMD. That could mean additional complications and IRS penalties for your loved ones.

#5: To streamline a rollover or Roth conversion

If you plan to initiate a rollover or Roth conversion during the year, it’s important to take your RMD ?rst. The IRS mandates that the first distribution from a retirement account each year be applied toward your RMD. If you inadvertently begin a rollover or conversion before taking the required distribution, the transaction could be disqualified, potentially leading to unexpected taxes and penalties. By taking your RMD early, you simplify the timing and help ensure the subsequent rollover or Roth conversion steps are compliant and processed smoothly.

Do you have questions regarding the timing of your RMD? Determining when to take your distribution involves careful consideration of tax implications, market conditions and your broader financial goals. By planning ahead, you may be able to avoid penalties, support charitable giving strategies and simplify the inheritance process for your heirs. If you’re unsure how timing fits into your overall retirement strategy, it may be worthwhile to consult with a financial professional who can help you assess the trade-o?s and make a decision aligned with your needs.

Hannah Rogge is a wealth manager at Creative Planning (formerly Monterey Private Wealth). She welcomes questions you may have concerning investments, taxes, retirement or estate planning. Send your questions to: Hannah Rogge, 2340 Garden Road, Suite 202, Monterey, CA, 93940. Or you can email hannah.rogge@creativeplanning.com.