It will cost you if you fail to take out retirement cash by this deadline

  • If you turned 70½ in 2017, you have until April 1 to take your first required minimum distribution.
  • Taking that withdrawal this year will mean you're on the hook to take two distributions in one year, one for last year and one for this year.
  • Keep the deadlines for those payments in mind and try to limit other taxable income.
Gift money
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If you turned 70½ last year and have yet to take a required minimum distribution (RMD) for 2017, you still have until April 1 to take out that money.

Keep in mind that withdrawal will be considered a taxable event for this year. And because you're now on the hook to take those payments annually, you will need to take a second withdrawal by the end of December for 2018.

"In theory, you're taking two RMDs right in this year," said Sally Brandon, senior vice president of client service and advice at Rebalance IRA. "For some people, that might not be ideal for their tax bracket."

The easiest way to offset that taxable income would be to give that RMD money to charity through a qualified charitable distribution, said Jeffrey Levine, CEO and director of financial planning at BluePrint Wealth Alliance in Garden City, New York.

That strategy, however, will only work for individual retirement accounts, not 401(k) plans, Levine said.

If you take two RMDs, watch your taxable income in other areas, such as voluntary distributions and sales that will trigger capital gains.

A charitable distribution "is by far the first thing I would turn to," Levine said. "Even if it's $500, that's $500 less that you have to add to your income."

If you have to take two withdrawals this year, you can take them both at once. Brandon recommends waiting to take the 2018 distribution.

"If you take it out now, you're locking in your gains and/or losses and where the market is today versus the end of the year," Brandon said.

Rather than spending that money, you may want to put it into a taxable account and invest it, Brandon said.

If you need to take an RMD by April 1, you want to request that as soon as possible, Brandon said.

Mark your calendars now for your end of year RMD, which Brandon said she recommends retirees request in late October to beat the rush. Technically, you have until Dec. 31 to make that withdrawal.

Beware: If you fail to take the full RMD by the deadline, the amount you should have withdrawn is taxed at 50 percent.

If you're turning 70½ this year, you want to try to take your first RMD by the end of December rather than wait until April 2019, Levine said.

"Most people are better off floating those distributions over two years and not waiting until April 1," Levine said.

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