When Should You Withdraw Your Required Minimum Distribution? The January Strategy Explained

Understanding Required Minimum Distributions

The IRS mandates that owners of tax-deferred retirement accounts—such as traditional IRAs and 401(k)s—begin making mandatory annual withdrawals starting the year they turn 73. While the deadline technically extends to December 31st (or April 1st of the following year for your initial distribution), many retirees face a crucial decision: should they fulfill their entire required minimum distribution early in the year, or space it out strategically?

The stakes are real. Missing your required minimum distribution deadline triggers a substantial 25% penalty on the amount you failed to withdraw, a consequence far steeper than the actual taxes owed on the distribution itself.

How Your Required Minimum Distribution Gets Calculated

The calculation process is relatively simple. Take your account balance as of December 31st of the preceding year and divide it by your distribution period—a figure based on your age on December 31st of the current year, sourced from the IRS Uniform Lifetime Table.

Consider this scenario: You’ll be 75 on December 31st, 2026, with $500,000 sitting in a traditional 401(k) as of year-end 2025. Your required minimum distribution would be approximately $20,325 ($500,000 ÷ 24.6).

Note that Roth accounts and 401(k)s from your current employer (if you own less than 5% of the company) are exempt from these mandates.

The Case for Early January Withdrawals

Taking your required minimum distribution immediately in January offers tangible peace of mind. You eliminate the risk of forgetting entirely, which could prove costly given the 25% penalty structure. Psychologically, “getting it done” allows you to stop worrying about the obligation for the entire year.

There’s also a market-timing argument. Portfolio values fluctuate throughout the year. If you wait and your investments decline 20% by mid-year, you’d need to liquidate more assets to meet your required minimum distribution than you would have in January. By withdrawing early when valuations are potentially higher, you preserve more shares for future growth.

The Investment Cost of Early Withdrawal

However, this strategy has a significant opportunity cost. Money withdrawn in January cannot generate returns for the remaining eleven months. For retirees concerned about depleting their savings prematurely, this forgone growth could be meaningful over decades.

Some investors address this through quarterly distributions—taking 25% of their annual required minimum distribution every three months. This approach balances the psychological benefit of compliance with the mathematical advantage of extended market exposure.

Making Your Decision

The month you take your required minimum distribution matters less than ensuring you complete it by year-end. Whether you withdraw in January, October, or November—as long as you satisfy the full amount before December 31st—you’ve met your legal obligation and avoided penalties.

Your choice should align with your financial situation, risk tolerance, and personal comfort level. If market timing concerns you, early withdrawal provides security. If investment growth is crucial to your long-term sustainability, spacing distributions makes sense.

The critical takeaway: don’t let perfect strategy paralyze action. Taking your required minimum distribution on any schedule beats missing the deadline entirely.