As of early November, however, Fidelity reported that about half of its 970,000 I.R.A. customers hadn’t made any required withdrawals for 2017, while an additional 12 percent had taken a partial withdrawal.
Some people may have trouble adjusting to the idea of taking money out of retirement accounts after decades of putting cash into them, Ms. Cassidy said. Or it may be that because the stock market has been doing well, people are more reluctant than usual about taking money out of equities.
Whatever the reason, neglecting to make the withdrawal on time can be costly, said Frank Fiumecaldo, a financial planner and director of client services at wealth manager R. W. Rogé & Company in Bohemia, N.Y. You may face a penalty of 50 percent of the money you didn’t withdraw. If, for instance, you were required to take out $3,000 but didn’t, you could owe a penalty of $1,500. It’s possible to have the penalty waived by filing a form with the I.R.S. and offering a reasonable explanation, he said. But why risk it?
This year, it’s more important than usual not to procrastinate, Ms. Cassidy noted, because Dec. 31 falls on a weekend, meaning the last day to take an annual required minimum distribution, or R.M.D., for 2017 is a bit earlier, on Dec. 29.
If you don’t need the money right away for living expenses, you can invest it in a taxable account. Or you can donate it to charity. As long as the money — up to $100,000 — goes directly to the charitable organization, you’ll avoid paying income taxes on it (although you can’t claim a tax deduction for the gift), Ms. Cassidy said.
Clients who depend on their R.M.D.s to meet regular living expenses often ask to have the funds dispensed monthly, Mr. Fiumecaldo said.
Here are some questions and answers about required minimum distributions:
Is the deadline for R.M.D.s always at the end of year?
You must make an initial withdrawal by April 1 of the year after you turned 70½. Then, after the first distribution, the annual deadline switches to Dec. 31. So if you turned 70½ in 2017 (meaning, you were born between July 1, 1946, and June 30, 1947, Ms. Cassidy said), you can wait another three months to make an initial withdrawal.
But be aware that there’s a potential downside to waiting, depending on your specific financial situation, Mr. Milove said. If you delay your first withdrawal to early 2018, you won’t have to worry about paying a penalty. But you’ll have to take another annual distribution — for 2018 — by the end of the year. Taking two withdrawals in one year will increase your taxable income.
“You could push yourself into a higher tax bracket,” Mr. Milove said.
On the other hand, say you worked during part of the year you turned 70½. Adding an R.M.D. to the income from your job might also push you into a higher tax bracket. So it might be better to wait and take two distributions the next year.
“There are times when it makes sense,” Mr. Fiumecaldo said. It’s helpful to consult with a tax adviser or financial planner, he said, to see what works best for you.
How do I know how much I am required to withdraw?
The minimum amount is based on a formula that factors in your account balance and your life expectancy, using an I.R.S. table. Most investment companies calculate the amount for their customers, and usually offer the option of having the correct amount automatically transferred to an account of your choosing on a specified date. If you prefer to do the math yourself, Vanguard offers an online calculator. Or you can check out I.R.S. Publication 590B.
What if I have more than one I.R.A.?
You must calculate the minimum withdrawal for each account, but you can withdraw the total from a single I.R.A., if you prefer. That option isn’t available for 401(k)’s. If you have more than one, you generally must take distributions from each account separately, Mr. Milove said.