Time to shift from saving for retirement to taking income for retirement? The timing of your first required minimum distribution (RMD) can have an impact on your overall retirement picture.
Quick takeaways
You’ve probably spent years building your retirement savings. Now comes a new phase: putting those savings to work for you.
For many retirees, when to take money out of their retirement account is one of the first major financial decisions in retirement. It marks a shift from building up savings to drawing income from them.
That transition can feel unfamiliar, but it’s also a normal part of retirement planning. Understanding when to take it, how it may affect your taxes, and what options are available can help you make informed decisions with confidence.
A required minimum distribution, or RMD, is the minimum amount you must take each year from certain retirement accounts, including traditional IRAs and many employer-sponsored retirement plans such as 401(k)s.
For most retirees, RMDs begin at age 73, but you generally have until April 1 of the year after you turn 73 to take that first withdrawal.
If delaying your first RMD until the following year may sound appealing, consider this: you'll still need to take your second RMD by December 31 of that same year. That means you could end up taking two taxable distributions in one calendar year.
If this sounds like a lot to think about, don’t worry. RMDs are a routine part of retirement income planning. For many retirees, they simply become another source of income alongside Social Security, pensions, or investment accounts.
Your first RMD can influence several parts of your financial picture.
For starters, it helps establish how you'll approach future retirement withdrawals. The decisions you make now can set the tone for your broader income strategy in the years ahead.
Your first RMD may also affect:
- Your taxable income for the year
- Your federal and state tax obligations
- Medicare premiums, which can increase when income rises above certain thresholds
- How much flexibility you have with other income sources
Rather than viewing your first RMD as an obligation, it may help to think of it as an opportunity. It can be a chance to create a more predictable income plan and align your withdrawals with your retirement goals.
How to take your first RMD: 4 common options
The best approach to taking your first RMD depends on your income needs, tax situation, and personal preferences.
Take your first RMD early (the year you turn 73)
How it works
- You take your first RMD sometime during the calendar year you turn 73 rather than waiting until the following April.
Pros
- Avoids taking two RMDs in one year
- May help spread taxable income more evenly
- Provides greater control over tax planning
Cons
- Requires planning sooner
- May increase taxable income earlier than expected
Best for
- Retirees who want to manage taxes steadily and minimize surprises
Delay your first RMD until April 1 of the following year
How it works
- You wait until the deadline in the year after turning 73 to take your first RMD.
Pros
- Delays taxable income for one year
- May be beneficial if your current year's income is unusually low
Cons
- Requires two RMDs in the same calendar year
- May push income into a higher tax bracket
- May affect Medicare premiums
Best for
- Retirees who expect lower income in the year they turn 73 and have flexibility to manage a larger amount of taxable income later
Take your RMD as monthly or scheduled payments
How it works
- Instead of taking one large withdrawal, you spread your annual RMD across monthly, quarterly, or other scheduled payments.
Pros
- Creates a predictable paycheck-like income stream
- May help with budgeting and household expenses
- Could reduce the temptation to spend a large amount all at once
Cons
- Less flexibility for large expenses
- May require setup through your financial provider
Best for
- Retirees who value consistent, scheduled payments
Take a lump-sum withdrawal
How it works
- You withdraw the entire RMD amount at one time.
Pros
- Simple and straightforward
- Easier to track and manage
- Can help fund larger planned expenses
- May support portfolio rebalancing or cash management strategies
Cons
- Concentrates taxable income in one transaction
- Doesn't provide income throughout the year
Best for
- Retirees who prefer simplicity or need access to funds upfront for planned expenses such as travel, home improvements, or healthcare costs
Many retirees use RMD funds for everyday living expenses, including:
- Housing costs
- Utilities
- Healthcare expenses
- Travel and leisure activities
Others choose to use the money to strengthen their financial flexibility by building a cash reserve for unexpected expenses.
And if you don't need the income right away, you still have options. You may choose to:
- Reinvest the money in a taxable investment account
- Help support children, grandchildren, or other family members
- Make gifts as part of an estate-planning strategy
- Consider qualified charitable distributions (QCDs), if eligible, which allow individuals age 70½ or older to make a tax-free transfer directly from an IRA to a qualified charity
The key thing to remember is that an RMD is a required withdrawal—not a required spending decision. You have flexibility in how those dollars fit into your broader financial plan.
As you approach age 73, a few basic steps can help you stay organized and avoid last-minute decisions.
The timing and method you choose for your first RMD can affect your taxes, income, and even healthcare costs. But with a little planning, you can approach the decision with confidence.
Whether you take your first RMD right away, delay it, schedule regular payments, or opt for a lump sum, a thoughtful approach can help support your lifestyle while reducing unnecessary surprises along the way.
