One smart reason to get rid of your RMD right away — instead of waiting until a deadline

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.

Since the Federal Reserve is expected to cut interest rates next week, delaying your RMD even briefly could mean missing out on today’s stronger returns, including higher-paying certificates of deposit (CDs). Taking your RMD as soon as possible gives you the opportunity to secure a better return before rates drop.

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 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. Currently, the best-paying CDs offer returns in the mid-4% range.

If you don’t need your RMD funds for a while, locking in one of these rates soon is smart, since the Fed is overwhelmingly expected to cut interest rates on December 10. This will likely trigger a wave of CD rate cuts across banks and credit unions, meaning what you’ll be able to secure later this month may be slightly lower than what you can secure today.

Also keep in mind that any CD could evaporate overnight, even before the Fed officially announces an interest rate move. So, if you see a CD offer that matches your financial timeline and offers a highly rated rate, it’s wise to grab it while you can.

Want flexibility instead? 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 in the mid-4% range, some as high as 5.00%. With these liquid accounts, you can access your money when you need it.

To compare today’s best offers, check out our daily ranking of the best high-yield savings accounts, which currently includes 17 options paying 4.15% 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 those returns are still available. If rates drop in the near future, you’ll be glad you held on to one of today’s highest APY rates while you had the chance.