Should I delay taking my first RMD?
Your first RMD from a traditional IRA and an employer retirement plan must be taken for the calendar year in which you turn 70-1/2. However, if you're still working, you can delay RMDs from your current employer's plan until the year you retire (but only if allowed by the plan and you are not a 5% owner).
In general, you must take your RMDs no later
than December 31 of each calendar year to
avoid a serious tax penalty equal to 50% of the amount you failed to withdraw. However, a special
rule applies to your first RMD. You have the
option of delaying your first distribution until
April 1 of the following calendar year.
You might delay taking your first distribution if
you expect to be in a lower income tax
bracket in the following year, perhaps because
you're no longer working or will have
less income from other sources. However, if
you wait until the following year to take your
first distribution, your second distribution must
be made on or by December 31 of that same
For example, assume you have a traditional
IRA and you turn 70½ in 2016. You can
take your first RMD during 2016 or you can
delay it until April 1, 2017. If you choose to delay your distribution until 2017, you will
have to take two required distributions in that
year, one for 2016 and one for 2017. This is
because your distribution for 2017 cannot be
delayed until the following year.
Receiving your first and second RMDs in the
same year may not be in your best interest. Since this "double"
distribution will increase
income for the year,
it will probably cause
you to pay more in
federal and state
income taxes. It
could even push you
into a higher federal income tax bracket for the year.
In addition, the increased income
may result in the loss of certain
tax exemptions and deductions that might
otherwise be available to you.
Obviously, the decision
to delay your first required distribution
can be important. Your tax professional can help you decide whether delaying the RMD makes sense for your personal tax situation.