Why you might want to make your 2025 RMD early — before the Fed cuts again

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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) as part of your retirement plan, you must take it by December 31 of each year to avoid steep IRS penalties. You can withdraw the required amount – or more – at any time you choose, either all at once or in smaller payments throughout the year.

For retirees who don’t urgently need their RMD funds but have to withdraw anyway, it often makes sense to wait until the end of the year. This approach maximizes your money’s time in the market and allows more time for tax-deferred growth.

If you don’t need your RMD funds right away, the next question is where to put them once you withdraw them so you can get a solid return. This is where the timing of the Fed’s interest rate cuts comes into play, because if interest rates fall again, today’s opportunities could look very different come December.

Why depositing your RMD cash into a CD can pay off now

A guaranteed return is attractive when interest rates change – and that’s exactly what a Certificate of Deposit (CD) offers. Once the interest rate on loans is fixed, it will not change – no matter how quickly or how far the Fed lowers its benchmark interest rate. Currently, there are dozens of options that pay returns in the low to mid 4% range.

Locking one of these rates soon is smart, given the high likelihood of the Fed cutting twice this year. According to the CME FedWatch tool at the time of this writing, there is a 97% chance that the Fed will cut its benchmark interest rate by a quarter point on October 29, and a 97% chance of another cut in December.

The takeaway: Today’s best CD prices are unlikely to last through the fall, let alone late December. If you want to make the most of this window, look at the CD terms that correspond to when you’ll actually need your RMD funds. They can help you lock in a rate that is likely to look generous once the Fed’s next moves take effect.

Just remember that locking in the CD rate means committing your money for the duration. An early withdrawal can result in an early withdrawal penalty that varies widely depending on the institution — from a small interest charge to a much harsher hit. So, choose your term carefully, and check each bank’s penalty rules before committing.

Where to keep RMD cash dividends of up to 5% – and still be affordable

If you don’t want to keep all of your RMD funds in a CD, you still have ways to earn a solid return. High Yield High Yield Savings Accounts offer average yields of 4%, some as high as 5.00%, and allow you to withdraw money as often as you need it.

To help you find the most competitive options, check out our daily ranking of the best high-yield savings accounts, which currently includes 15 options paying 4.25% or higher.

A higher-paying money market account may also make sense. Although their returns typically trail those of savings accounts — the current top rate is 4.40% APY — they give you the option of writing paper checks from your savings.

Just remember that, unlike a locked-in interest rate, savings and money market accounts pay a variable interest rate, which means those annuities will decrease whenever the Fed lowers its benchmark interest rate.

How to Find the Best Savings and CD Rates

Each business day, Investopedia tracks rate data for more than 200 banks and credit unions that offer CDs and savings accounts to customers across the country and determines a daily ranking of the highest-grossing accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the minimum initial account deposit must not exceed $25,000. It is also not possible to determine A maximum The deposit amount is less than $5,000.

Banks must be available in at least 40 states to be eligible to be available nationwide. While some credit unions require you to donate to a specific charity or association to become a member if you do not meet other eligibility criteria (for example, if you do not live in a certain area or work a certain type of job), we exclude credit unions with donation requirements of $40 or more. To learn more about how to choose the best rates, read our full methodology.