Your first required minimum distribution is a real milestone. After decades of saving, investing, and watching your retirement accounts grow, it’s the year the IRS asks you to start drawing some of that money out.
It’s also the year with the most room for confusion. Your first RMD comes with a special deadline that doesn’t apply to any other year, and while that extra time can be helpful, it can also lead to a bigger tax bill than you expected. Here’s what to know so your first RMD goes smoothly.
When Does Your First RMD Begin?
Required minimum distributions generally begin at age 73 for people born between 1951 and 1959, and at age 75 for people born in 1960 or later. (If you were born in 1959, there’s a small technical ambiguity in the law, but the IRS’s current position is that your RMD age is 73.)
RMDs apply to traditional, SEP, and SIMPLE IRAs, as well as the pre-tax portion of 401(k) plans, including owner-only 401(k)s. Roth IRAs don’t require distributions during the original owner’s lifetime, and since 2024, neither do Roth accounts in 401(k) plans.
How Your First RMD Is Calculated
Your RMD is based on your account’s fair market value as of December 31 of the year before you reach RMD age, divided by a life expectancy factor from the IRS Uniform Lifetime Table.
At age 73, that factor is 26.5, which works out to a little under 4% of your balance. For example, if your IRA was worth $500,000 on December 31, your first RMD would be about $18,868.
If your self-directed IRA holds real estate, notes, or other alternative assets, that December 31 value is especially important. It’s worth making sure your valuation is current and accurate before your first RMD year begins.
The April 1 Deadline: A One-Time Extension
Normally, each year’s RMD must be taken by December 31. Your first RMD is the exception.
For your first RMD only, you have until April 1 of the year after you reach RMD age. So if you turn 73 in 2027, you can take your first RMD any time in 2027, or wait until as late as April 1, 2028.
That extra time can feel like a gift, especially if you’re still figuring out your plan. But before you use it, there’s an important tradeoff to understand.
The Risk: Two RMDs in One Tax Year
The April 1 extension doesn’t delay your second RMD. Your second RMD is still due by December 31 of that same year.
Using the example above, if you turn 73 in 2027 and wait until March 2028 to take your first RMD, you’ll also need to take your second RMD by December 31, 2028. That means two RMDs count as taxable income in 2028.
Taking two distributions in one year can:
- Push you into a higher tax bracket, since both distributions stack on top of your other income.
- Increase how much of your Social Security is taxable.
- Raise your Medicare premiums in a future year, since those premiums are based on your income.
There’s one more subtle detail. Your second RMD is calculated using your account balance on December 31 of the year you turned 73. If your first RMD hadn’t come out yet on that date, it’s still included in the balance, which can make your second RMD slightly larger.
When Waiting Might Still Make Sense
The April 1 extension isn’t always a bad idea. If your income in the year you reach RMD age is unusually high, perhaps because you’re still working or selling a business, and you expect your income to drop the following year, taking both RMDs in the lower-income year could work in your favor.
The key is making the decision on purpose rather than by default. This is a great conversation to have with your CPA a few months before your first RMD year.
Special Considerations for Self-Directed Investors
- Plan your cash early. If your IRA holds mostly real estate or notes, start thinking now about where your first RMD will come from. Rental income, note payments, or a cash reserve inside the account can all help.
- Remember aggregation. If you have more than one traditional IRA, you can generally calculate each RMD and take the total from any one of them, which can let your self-directed investments stay put.
- In-kind is an option. If cash is tight, you may be able to distribute a portion of an asset instead of selling it.
- Business owners, take note. If you have a solo 401(k), the “still working” exception that lets some employees delay 401(k) RMDs doesn’t apply to business owners with more than a 5% stake. Your first RMD follows the standard schedule.
What If You Miss It?
Missing an RMD can trigger an IRS excise tax on the amount you didn’t withdraw, although the penalty can be reduced if the mistake is corrected promptly. If you realize you’ve missed a distribution, take it as soon as possible and talk with your tax advisor about next steps.
Your First RMD Checklist
- Confirm your RMD age based on your birth year.
- Make sure your December 31 account values are current, especially for alternative assets.
- Calculate your RMD for each account, or ask your custodian for help.
- Decide whether to take your first RMD this year or use the April 1 extension.
- Plan where the cash will come from.
- Decide whether you’d like taxes withheld from your distribution.
- Put your deadlines on the calendar.
How MidAtlantic IRA Can Help
Your first RMD doesn’t have to be stressful. Our team is happy to walk you through how RMDs work for your self-directed account, what information we’ll need, and how to request your distribution.
Because timing your first RMD can affect your taxes, we always recommend reviewing your plan with your CPA or financial advisor. MidAtlantic IRA doesn’t provide tax, legal, or investment advice, but we’re here to help you feel confident about this next chapter.
Approaching your first RMD? Schedule a call with our team and let’s plan it together.