Is It Better to Withdraw Monthly or Annually From My IRA?
- W. Scott Hurt, CFP®, CPA
- 5 days ago
- 12 min read
If you’re weighing an annual vs monthly retirement withdrawal, you’re asking the right question.
The schedule you choose can quietly influence taxes, Medicare premiums, and compliance with RMD rules—even if the “math” looks similar on paper.
At Covenant Wealth Advisors, we see this decision come up most often for sophisticated retirees who want the same thing you want: a system that supports your lifestyle, keeps taxes and administrative surprises to a minimum, and doesn’t require constant attention.
Key Takeaways
Taxes are annual. Execution is periodic. The tax bill is generally based on total annual income, but withholding rules and underpayment penalties depend on how you pay throughout the year.
RMDs create real deadline risk. The first-year RMD timing rule is where many retirees get tripped up.
One big withdrawal can be clean—or chaotic. Annual withdrawals may simplify cash management, but they require a withholding plan and a checklist.
For comprehensive IRA withdrawal strategies, consider approaches that maximize savings and minimize taxes.
IRMAA is a high-income “gotcha.” Medicare Part B premiums step up by income tier, and Social Security uses a tax-return lookback.
Centers for Medicare & Medicaid Services. For those interested in how these factors can affect your retirement plan, professional guidance is available.
There isn’t one “best” cadence. The right schedule depends on cash flow needs, tax-payment strategy, market behavior risk tolerance, and whether you’re in RMD years.
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Does Withdrawing Monthly vs. Annually From an IRA Change Your Taxes?
Usually, no—if the annual withdrawal amount is the same, your federal income tax outcome is primarily driven by your total annual taxable income, not whether you take IRA distributions monthly or once per year.
The schedule matters most for cash flow, tax withholding, and avoiding underpayment or deadline mistakes.
1) Income Tax is Annual, but Tax Payments Happen During the Year
Your IRA withdrawals add to taxable income (for traditional IRAs). The IRS doesn’t care whether you took $120,000 in January or $10,000 per month—the annual total feeds your tax return.
But the IRS does care about whether you paid enough tax during the year through withholding and/or estimated tax payments. That’s where withdrawal timing becomes practical.
2) The Withholding “Default” is Different for One-Time vs. Ongoing Payments
If you take a nonperiodic payment (think: “one-off” IRA distribution), IRS Publication 505 explains that withholding is generally a flat 10% unless you elect a different rate.
For affluent households, 10% withholding can be too low, depending on the rest of your income picture.
That doesn’t mean “annual is bad”—it means annual withdrawals should usually be paired with an intentional withholding decision.
“The biggest mistakes we see aren’t about whether clients withdraw monthly or annually—it’s that withholding is treated as an afterthought. Your distribution schedule should drive a tax-payment plan, not the other way around.” — Adam Smith, CFP®
3) Safe-Harbor Rules can Make Annual Withdrawals Easier (if You Use Them Correctly)
IRS Publication 505 lays out the core safe-harbor concept for avoiding underpayment penalties. In general terms, one approach is paying enough through withholding/estimated payments to cover 90% of current-year tax, or 100% of prior-year tax—and 110% if your prior-year AGI was more than $150,000 (with a separate threshold for married filing separately).
For those approaching retirement, it may be helpful to review the best questions to ask a financial advisor about retirement to ensure your tax and withdrawal strategies are aligned.
Why it matters: affluent retirees often have uneven income (capital gains, business income, large IRA distributions, Roth conversions). A well-structured withholding plan can reduce the need to perfectly time quarterly estimates.
4) Withholding Timing Can be Surprisingly Favorable for Planning
Publication 505 also explains that, for estimated-tax calculations, one-fourth of your estimated withholding is treated as withheld on each quarterly due date, unless you choose to track it differently.
This is one reason some retirees intentionally revisit withholding late in the year. The goal isn’t to “game the system.” It’s to avoid an accidental underpayment penalty when your income ends up higher than expected.
Bottom line: monthly vs. annual doesn’t usually change your tax bracket by itself, but it can absolutely change whether taxes feel smooth or stressful.
How Do RMD Rules Influence Whether You Withdraw Monthly or Annually From an IRA?
RMD rules don’t require a monthly or annual schedule—you can take RMDs in any pattern as long as the full amount is withdrawn by the deadline.
However, deadlines are strict: your first RMD is generally due by April 1 of the year following the year you reach age 73 (or age 75 if you were born in 1960 or later), and later RMDs are due by December 31.
For many affluent retirees, RMDs are the reason this question matters at all.
1) Know Your Two Critical Dates: April 1 (First Year) and December 31 (Ongoing Years)
The IRS explains that the required beginning date (RBD) for your first IRA RMD is April 1 of the year following the year you reach age 73 (or age 75 if you were born in 1960 or later).
After that, the rule is simpler: each year after your required beginning date, you must withdraw your RMD by December 31.
2) The “Two RMDs in One Year” Trap
If you delay your first RMD until the April 1 deadline, you may end up taking:
The prior-year RMD (by April 1), and
The current-year RMD (by December 31)
…in the same calendar year. The IRS explicitly notes this possibility and that taking the first RMD earlier (by December 31 of the year you reach your RMD age of 73 or 75) can spread taxable income into separate tax years.
This is where affluent planning gets real: two distributions in one year may increase taxable income and can increase the odds of crossing an IRMAA tier.
3) Missing an RMD is Expensive—and Avoidable
The IRS warns that if you don’t take enough RMD, you may owe an excise tax of 25% of the amount not distributed as required (potentially 10% if withdrawn within 2 years) and you may need to file IRS Form 5329.
This is why “annual withdrawal” should never mean “I’ll remember in December.” It should mean “I have a system.”
4) How RMD Calculation Touches Your Schedule Decision
RMDs are calculated using IRS life expectancy tables (commonly the Uniform Lifetime Table) referenced in IRS guidance and Publications such as 590‑B.
You don’t need to memorize tables, but you do want a process: calculate, set the distribution cadence, confirm completion, and document.
Monthly withdrawals can reduce “oops, I forgot” risk.
Annual withdrawals can work well if you use a checklist and calendar controls.
Can IRA Withdrawals Affect Medicare Premiums (IRMAA)?
Yes—IRA withdrawals can raise your MAGI, and higher MAGI can trigger Medicare IRMAA surcharges for Part B (and Part D).
The key is that IRMAA is based on annual income levels and uses a two-year lookback. Monthly vs. annual withdrawals typically won’t change IRMAA if the yearly total is the same, but income spikes can.
For affluent retirees, this is often the most overlooked part of the “monthly vs annual” question.
Why IRMAA Shows up in IRA Withdrawal Planning
Social Security explains that to determine your 2026 IRMAA, it generally uses the “most recent federal tax return” information provided by the IRS—typically a tax return filed in 2025 for tax year 2024.
CMS publishes the official Medicare Part B premium and IRMAA amounts. In 2026, the standard Part B premium is $202.90/month, and it increases by tier.
Data Visualization: 2026 Medicare Part B IRMAA Tiers (Full Part B Coverage)
2026 MAGI (Individual) – see effective strategies to lower your taxable income once you start taking required minimum distributions (RMDs). | 2026 MAGI (Married Filing Jointly) | Part B IRMAA (monthly) | Total Part B premium (monthly) |
≤ $109,000 | ≤ $218,000 | $0.00 | $202.90 |
> $109,000 to ≤ $137,000 | > $218,000 to ≤ $274,000 | $81.20 | $284.10 |
> $137,000 to ≤ $171,000 | > $274,000 to ≤ $342,000 | $202.90 | $405.80 |
> $171,000 to ≤ $205,000 | > $342,000 to ≤ $410,000 | $324.60 | $527.50 |
> $205,000 to < $500,000 | > $410,000 to < $750,000 | $446.30 | $649.20 |
≥ $500,000 | ≥ $750,000 | $487.00 | $689.90 |
How to Use this Table in a “Monthly vs Annual” Decision
If you plan to withdraw $120,000 from your IRA this year, the schedule (monthly vs annual) won’t change your MAGI if the total is the same. But the schedule can change behavior:
Annual withdrawals can accidentally stack with other events (large capital gains, Roth conversions, business income), creating a “spike year.”
Monthly withdrawals can feel smoother and may reduce the urge to “catch up” with a large late-year distribution.
“For high-net-worth retirees, IRMAA is often the surprise line item. The schedule doesn’t change your annual income by itself—but your system can either prevent or create income spikes that push you across a tier.” — Matt Brennan, CFP®
Important nuance: If your income goes down, you may have options.
The Social Security Administration also notes that if your income has gone down, you can contact Social Security and they may make a new decision about your IRMAA for specific life events (for example: stopping work, loss of income-producing property, pension plan changes, etc.).
That’s not a “strategy” to rely on. It’s a reminder that Medicare premiums are part of the broader retirement income plan.
When Does Monthly Make More Sense, and When Does Annual Make More Sense?
Monthly withdrawals often fit retirees who want a consistent “paycheck,” tighter budgeting, and lower operational risk of missing an RMD deadline.
Annual withdrawals can work well for retirees with larger cash reserves who prefer fewer transactions and want flexibility to adjust withholding or distribution amounts later in the year—provided they follow a clear process.
Monthly Withdrawals Tend to Fit Well When…
You want predictable cash flow. If your lifestyle spending is steady, monthly distributions create a clean retirement paycheck.
You want guardrails for RMD completion. A monthly RMD cadence (or monthly withdrawals that at least exceed the RMD pace) can reduce the likelihood of missing the year-end deadline.
You prefer “less cash sitting idle.” With annual withdrawals, many people pull a full year’s spending needs and hold it in cash or a short-term bucket. That can reduce market exposure—but it can also create cash drag if markets rise. Markets can move up or down, so this is a risk tradeoff, not a promise.
Risks to Acknowledge (Monthly):
More moving parts: more distributions, more line items, more opportunities for administrative error.
If you’re drawing from a volatile portfolio, frequent withdrawals can still be impacted by market declines (sequence-of-returns risk is real).
Annual Withdrawals Tend to Fit Well When…
You have significant liquidity already. If you keep a sizable cash or short-term reserve, you may only need one IRA distribution for taxes or rebalancing, not for spending.
You want flexibility for tax planning. Some retirees prefer to wait until later in the year after they see realized gains/losses, business income, or other variable items—then set a distribution amount and withhold intentionally. Publication 505’s withholding rules matter here.
Affluent retirees frequently coordinate multiple income streams (portfolio income, deferred comp, business proceeds, real estate). One annual IRA withdrawal can be a clean lever—again, with a process.
Risks to Acknowledge (Annual):
Deadline risk (especially for RMDs): a single missed calendar item can become expensive.
Withholding mismatch: a default 10% on a large one-time distribution may be inadequate depending on your bracket and other income.
Market timing behavior risk: taking one large withdrawal can feel emotionally tied to market headlines. That can lead to reactive decisions.
What’s a Practical Decision Framework for Affluent Retirees Choosing Annual vs. Monthly Retirement Withdrawal?
Start by separating “spending withdrawals” from “tax/RMD withdrawals.”
Then pick a cadence that matches your cash-flow needs, build a withholding plan (especially if AGI exceeds $150,000), and stress-test the annual total against Medicare IRMAA tiers.
Finally, automate what you can and schedule mid-year and year-end reviews to confirm you’re on track.
Here’s the framework we use in real planning conversations:
Step 1: Define the Purpose of the IRA Withdrawal
Most withdrawals fall into one of these buckets:
Lifestyle spending (your “retirement paycheck”)
RMD compliance (forced distribution after RBD)
Tax management (withholding, safe-harbor coverage)
Portfolio management (rebalancing, liquidity, opportunistic moves)
You can use different cadences for different purposes. Example: monthly for spending + one strategic year-end distribution for taxes.
Step 2: Decide the Annual Total First—then Choose the Schedule
Affluent planning is usually about the annual total. Once you decide that number, monthly vs annual becomes implementation:
Monthly cadence: annual total ÷ 12
Quarterly cadence: often aligns with estimated tax due dates
Annual cadence: typically paired with specific withholding elections
Step 3: Build a Withholding Plan that Matches Your Reality
This is where IRS Publication 505 is essential:
Nonperiodic retirement payments generally default to 10% withholding, unless you elect a different rate.
Higher-income safe-harbor: 110% of prior-year tax if prior-year AGI > $150,000 (general rule described in Pub 505).
Withholding timing conventions can reduce the need for perfectly timed quarterly estimates, depending on your situation.
This is not about “minimizing taxes at all costs.” It’s about reducing avoidable penalties and surprises.
Step 4: Check IRMAA Tier Exposure Before Locking the Plan
Use the IRMAA table above as a planning lens. CMS publishes the official tiers and premiums.
If your projected MAGI is near a tier line, a planner may evaluate options like smoothing income across years or rethinking the timing of large income events. (This is where personalized advice matters.)
Step 5: Automate and Audit
Whether you choose monthly or annual, put these two “audits” on your calendar:
Mid-year check (June/July): verify distributions, withholding, and projected taxable income
Year-end check (October/November): confirm RMD completion plan and tax-payment sufficiency
At Covenant Wealth Advisors, we build these checkpoints into clients’ retirement income systems so the plan doesn’t depend on memory.
What Other Retirement Withdrawal Questions Do Clients Ask?
Most follow-up questions are really about coordination: how withdrawal cadence interacts with 401(k) rules, RMD deadlines, “best” retirement withdrawal strategies, and rules-of-thumb like the $1,000/month idea.
The right answers usually require aligning cash flow with tax rules, Medicare thresholds, and portfolio risk—not picking one universal schedule.
Not Sure If You're Making the Right Retirement Decisions?
Schedule a free Strategy Session to discuss your situation and get honest answers.
What's keeping you up at night about retirement
How we approach tax planning, income, and investments differently
Whether we're the right fit—or if you're better off on your own
No pressure. No obligation. Just an honest conversation.
Frequently Asked Questions
Is it Better to Withdraw From a 401(k) Monthly or Annually?
401(k) withdrawals can work monthly or annually, but employer plans sometimes have different distribution mechanics than IRAs, and some plans limit how frequently you can take partial withdrawals.
The “best” cadence depends on your spending needs and tax-payment plan. If you’re in RMD years, your distribution schedule must still satisfy the deadline rules (the calendar matters).
Is it Better to Take RMDs Monthly or Yearly?
You can take RMDs monthly, quarterly, or yearly. The IRS focus is on whether the full RMD amount is withdrawn by the deadline. Many retirees choose monthly to reduce the operational risk of missing the year-end requirement.
Yearly can be fine if you have strong controls—especially because the IRS notes the first-year RMD timing nuance (April 1 vs December 31).
What is the Best Withdrawal Strategy for Retirement?
There isn’t one “best” strategy for every retiree. A strong approach usually coordinates (1) a reliable cash-flow plan, (2) tax withholding and safe-harbor rules, (3) RMD compliance, and (4) Medicare IRMAA awareness for higher-income households.
The right mix depends on your assets, income sources, risk tolerance, and goals.
What is the $1,000 a Month Rule for Retirement?
The “$1,000 a month rule” is a simplified rule-of-thumb some people use to translate a lump sum into monthly income expectations (for example, “how much do I need invested to generate $1,000/month?”).
It can be a starting point for conversation, but it ignores taxes, inflation, market volatility, and longevity risk. High-net-worth retirement planning should be built from your actual spending goals and your tax/Medicare picture, not a single rule.
Conclusion
If your annual withdrawal amount is the same, the monthly vs annual debate is rarely about “lower taxes.”
It’s about control: cash flow reliability, tax-payment execution, RMD compliance, and avoiding income spikes that can raise Medicare premiums.
Would you like our team to just do your retirement planning for you? Contact us today for a complimentary strategy session.
About the author:
Senior Financial Advisor
Scott is a Financial Advisor for Covenant Wealth Advisors, a CERTIFIED FINANCIAL PLANNER™ practitioner and a Certified Public Accountant (CPA). He has over 17 years of experience in the financial services industry in the areas of financial planning, tax planning, and investment management.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible, no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.