One smart reason to take your RMD now — instead of waiting until December

You have until December 31 to get your RMD for 2025, but waiting could cost you.

If you are subject to a required minimum distribution (RMD) this year, you must withdraw it by December 31 to avoid steep IRS penalties. You can take it all at once or in smaller payments, but the full amount should be out of your account by the end of the year.

Many retirees who don’t urgently need their RMD funds wait until December so the money can remain invested and continue to grow tax deferred as long as possible. This strategy often makes sense, but not always.

With the Fed likely to cut interest rates in December or January, delaying your RMD withdrawal could mean missing out on an opportunity to move that money where you can keep today’s higher yields — such as today’s higher-paying CDs. Acting sooner allows you to ensure a stronger return before prices start to fall.

Taking an RMD now may help you ensure a better return in the future

A guaranteed return is attractive when interest rates change – and that’s exactly what a Certificate of Deposit (CD) offers. Once the CD interest rate is locked in, it will not change, no matter how quickly or by how much the Fed lowers its benchmark interest rate. Right now, many of the best CDs are paying yields in the low to mid 4% range.

Locking in one of these rates soon might be smart, given the possibility of a Fed rate cut in December or January. As of this writing, CME FedWatch data put the probability of a quarter-point cut at about 45% in December and about two-thirds by late January.

Even if the central bank keeps interest rates steady next month, CD yields could start to fall if expectations of a January cut increase. This is because banks and credit unions often start lowering their deposit rates Anticipation On the Fed’s next move.

Bottom line: There’s no guarantee that today’s best CD rates will continue until your RMD is due on December 31. So if you’re planning to save that money instead of spending it, this might be the right moment to score a guaranteed high return while it’s still available.

Keep in mind that locking in the price of CDs means committing your money for the duration. Cashing out before the due date can result in an early withdrawal penalty that varies by institution — from modest to much more severe fees. So choose your term carefully, and check your bank’s penalty rules before you book.

Do you want flexibility? Here’s how to preserve your RMD cash to get the highest return

If you prefer not to lock up all of your RMD funds in a CD, you still have ways to earn a solid return. Many high-yield savings accounts pay interest rates ranging from 4%, some as high as 5.00%, and allow you to access your money whenever you need it.

To compare today’s best offers, check out our daily ranking of the best high-yield savings accounts, which currently includes 16 options paying 4.20% or higher.

A high-yield money market account may also make sense. While their returns often trail the best savings accounts — the current nationwide leader offers a 4.50% annual return — they add flexibility by allowing paper checks to be written.

Keep in mind that, unlike a locked-in interest rate, savings and money market accounts pay variable returns — meaning those annuities could fall once the Fed starts lowering its benchmark interest rate.

Bottom line

Even if you don’t need your RMD funds right away, withdrawing soon may help you secure a higher return on your money while it’s still available. If prices fall next month, you’ll be glad you got one of today’s strongest returns while you had the chance.

How to Find the Best Savings and CD Rates

Investopedia tracks rates from more than 200 banks and credit unions across the country to determine the highest-grossing accounts each business day. All institutions are federally insured, and only accounts opened for clients nationwide with reasonable minimum deposits qualify. Read our full methodology here.