RMD Basics No. 1: When Is Your First RMD Due?
First, let’s start with the basics. Original owners of traditional IRAs are subject to required minimum distributions when they turn 70½. The RMD is taxed as ordinary income, with a top tax rate of 37% for 2019.
You must take your first RMD by April 1 of the year after you turn 70½. The second and all subsequent RMDs must be taken by December 31.
An account owner who delays the first RMD will have to take two distributions in one year. For instance, a taxpayer who turns 70½ in March 2019 has until April 1, 2020, to take his first RMD. But he’ll have to take his second RMD by December 31, 2020.
To determine the best time to take your first RMD, compare your tax bills under two scenarios: taking the first RMD in the year you hit 70½, and delaying until the following year and doubling up RMDs.
“It’s important to look at whether [doubling up] will push you into a higher tax bracket,” says Christine Russell, senior manager of retirement and annuities for TD Ameritrade, and whether it will subject you to higher income-related Medicare premiums. Doubling up could be the right strategy, however, if you’re retiring in the year you turn 70½ and your wages plus the first RMD would push you into a higher tax bracket.
