Retirees who own traditional IRAs and most workplace retirement accounts must begin required minimum distributions the year they turn 73, and the total owed for that year is fixed the moment December 31 of the prior year closes the books on the account balance. What is not fixed is how that money comes out. Account owners can take the entire sum in one December withdrawal or divide it into smaller payments spread across twelve months, and the choice has real consequences for cash flow, withholding, and how much of a portfolio gets sold on any single day.
How the IRS calculates what’s due and by when
The Internal Revenue Service sets the required minimum distribution by dividing the account’s balance on the prior December 31 by a life-expectancy factor published in its own actuarial tables, using a joint table when a much-younger spouse is the sole beneficiary and a uniform table otherwise. The first RMD carries a one-time grace period: someone who turns 73 can wait until April 1 of the following year to take it, though a second RMD is still due by that same year’s December 31, effectively doubling the taxable withdrawal for anyone who delays the first one all the way to the deadline.
Retirement plan participants who are still working can often postpone RMDs from that employer’s plan until they retire, unless they own more than 5% of the business sponsoring it, but IRA owners have no such exception and must begin on schedule regardless of employment status. A person who owns several IRAs can add up each account’s required amount and withdraw the total from just one of them, while separate workplace plans such as a 401(k) or 457(b) account each require their own distribution and cannot be combined the way IRAs can.
Once retirement money moves through an inherited account instead of an original owner’s, the calculation changes again. A surviving spouse, a minor child, someone chronically ill, or a beneficiary less than ten years younger than the original owner can still stretch withdrawals over their own life expectancy, but most other heirs who inherit an IRA or workplace account after 2019 must empty it entirely within ten years of the original owner’s death, regardless of how the original owner had been withdrawing before they died.
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Choosing a payment schedule that fits the rest of the tax return
Because the total dollar amount is set by the formula, nothing about installment payments changes how much ends up as taxable income for the year — the full RMD counts against adjusted gross income regardless of whether it arrives as one check or twelve. What changes is when the associated withholding gets collected and how much of an investment position must be liquidated at any single moment. A retiree who requests proportional withholding on quarterly or monthly withdrawals spreads that reduction in take-home cash across the year instead of absorbing it all at once in December, which can matter for someone budgeting a fixed monthly income from savings.
Spreading withdrawals across several dates also reduces the risk of selling investments at a single, potentially unfavorable price. A retiree who liquidates fund shares every quarter captures four different market prices rather than betting an entire year’s distribution on wherever markets happen to sit on one December afternoon, a version of the same reasoning that underlies dollar-cost averaging on the way into a portfolio.
The tradeoff runs in the other direction for retirees who would rather not think about the account more than once a year. A single December withdrawal is simpler to arrange with a custodian, avoids four or twelve separate transaction requests, and still meets the deadline as long as it clears before December 31. The installment approach costs a little more administrative attention in exchange for smoother cash flow and reduced timing risk — a genuine tradeoff rather than a clear-cut best answer for every household.
The penalty for falling short of the deadline
The deadline discipline applies no matter how the withdrawals are scheduled across the year. An account owner who fails to withdraw the full required amount by December 31 faces an excise tax the IRS sets at 25% of the shortfall, reduced to 10% if the mistake is corrected within two years, filed on Form 5329 alongside the year’s federal return. That penalty is part of the reason many retirees prefer spacing distributions through the year rather than waiting for a single December withdrawal: a delayed brokerage transfer, a paperwork error, or a market closure near the holidays leaves far less room to fix a shortfall before the deadline than a schedule that has already delivered most of the required amount months earlier.
The IRS also allows the penalty to be waived when a shortfall was the product of reasonable error and the account owner is taking steps to correct it, a relief valve reserved for genuine mistakes such as an administrator’s late notice rather than a retiree simply forgetting to withdraw. Claiming that relief still requires filing Form 5329 with a written explanation attached, which is one more reason a retiree who has already been taking distributions on a running schedule has an easier story to tell than one who skipped the year entirely.
None of this changes what a retiree ultimately owes the IRS for the year, but it does change how predictable the process feels. Taking a required withdrawal in smaller installments, with withholding matched to each payment, turns an annual tax event into something closer to a paycheck — a detail that matters more to household budgeting than to the total on the return, but matters all the same for retirees living on a fixed income and trying to avoid a jarring one-time hit to their account balance in the year’s final weeks.
This article was researched and drafted with the assistance of artificial intelligence.
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