The Biggest Mistake You Might Make With Your Next RMD

By Maurie Backman – Mar 13, 2026 at 9:36AM ESTKey PointsRequired minimum distributions (RMDs) have to be taken by Dec. 31 each year.Waiting until the end of the year to withdraw your RMD could hurt you from a tax-planning perspetive.It's important to plan ahead and give yourself options.In the course of deciding whether to save for retirement in a traditional account versus a Roth, people tend to focus on when they're getting a tax break. With a traditional IRA or 401(k), you get a tax break on your contributions. With a Roth IRA or 401(k), you get a tax break on your withdrawals. But there's another key factor to consider when you're deciding between a traditional or Roth retirement plan. Traditional IRAs and 401(k)s force savers to take required minimum distributions, or RMDs, whereas Roth accounts do not. And those RMDs could introduce some complications during retirement, since they can create an unwanted tax headache. Image source: Getty Images. If you have a traditional retirement plan that's subject to RMDs, it's important to understand the rules involved. And it's also important to time your RMDs carefully. A big RMD mistake you don't want to make RMDs begin at age 73 (or 75 for younger workers) and are due by Dec. 31 each year. Failing to meet that deadline could subject you to a 25% penalty. Technically, this means you could take your RMD on the last day of the year and be just fine in terms of avoiding penalties. But that doesn't mean waiting until the last minute to take your withdrawal is a smart decision. Remember, any money you withdraw in RMD form is taxable income. If you wait until the very end of the year to take an RMD, you may lose out on opportunities to plan strategically. Let's say you take your RMD at the very end of December and find out that your additional income pushes you into a higher tax bracket. At that point, you may not be able to do much to offset that. But let's say you take your RMD earlier in the year and realize you're likely looking at a significant increase in your tax rate. You may, at that point, have time to take steps to compensate, like selling assets at a loss or doing other things to reduce your taxable income overall. Another issue with taking your RMD late in the year? Potential market volatility. If you're forced to sell assets when their value has fallen to meet the RMD deadline, you risk a longer-term portfolio decline that could be tricky to recover from. If you plan for your withdrawals earlier or take them at different intervals during the year, you can potentially reduce the risk of being forced to sell when the market is at its worst. Plan ahead for RMDs While taking your RMD each year by Dec. 31 should help you avoid penalties, it may not help you avoid financial stress and upheaval. A better plan? Have RMDs on your radar all year long, and start strategizing about them early on. That could help you minimize your taxes and avoid a big portfolio hit.Read NextMar 14, 2026 •By Maurie BackmanThis Common Budget Habit Could Be Quietly Destroying Your Retirement SavingsMar 14, 2026 •By Maurie BackmanIf You're Behind on Retirement Savings at 50, Here's a Strategy That Could Help You Catch UpMar 14, 2026 •By Kailey Hagen, CFPThis Is Where I Start Saving for Retirement Every YearMar 14, 2026 •By Kailey Hagen, CFPYou're Beating the Average Retirement Saver if You Have More Than ThisMar 14, 2026 •By Maurie BackmanThis Retirement Account Lets You Avoid RMDs -- But There's a CatchMar 14, 2026 •By Kailey Hagen, CFPThis Possible Social Security Change Could Make Saving for Retirement Even HarderAbout the AuthorMaurie Backman is a contributing Motley Fool retirement and Social Security expert with more than a decade of experience writing about personal finance, investing, and retirement planning. Maurie previously worked in finance analyzing distressed companies. She studied finance at Binghamton University.TMFBookNerd