Required Minimum Distributions: Planning Ahead to Minimize the Tax Hit

The withdrawal rate nearly doubles between 73 and 90. Even if your account balance stays flat, the required distributions (and the taxes on them) grow substantially every year. That’s the core of the RMD planning problem.

Think of a traditional IRA or 401(k) as a partnership with the IRS. You put money in, you watch it grow, and you don’t pay taxes on any of it along the way. But the IRS hasn’t forgotten about their share. RMDs are the moment they tap you on the shoulder and say “time to settle up.” And unlike most bills, this one gets bigger every year.

Which accounts require RMDs?

Not all retirement accounts play by the same rules. Understanding which ones trigger RMDs is the foundation of tax-efficient retirement planning.

The age 73 trigger

SECURE 2.0 set the RMD starting age at 73 for anyone born between 1951 and 1959. For people born in 1960 or later, it rises to 75 starting in 2033. Your first RMD must be taken by April 1 of the year following the year you turn 73. After that, each year’s RMD is due by December 31.

That April 1 deadline for the first year sounds generous, but there’s a catch. Delaying forces you to take two RMDs in the same calendar year: the delayed first-year distribution plus the second-year distribution by December 31. For someone with a $1 million IRA, that’s roughly $75,000 of taxable income in a single year instead of about $38,000 spread across two.

Why RMDs create a tax problem

RMDs don’t exist in isolation. They stack on top of Social Security benefits, pensions, part-time earnings, and investment income. A $50,000 RMD might land in the 22% or 24% federal bracket, not the 12% bracket you’d face on your first dollars of income.

And higher income can trigger Medicare’s Income-Related Monthly Adjustment Amount (IRMAA), adding hundreds per month to Part B and Part D premiums. Unlike taxes, IRMAA uses a two-year lookback. A single high-income year in 2024 means higher Medicare premiums in 2026. For married couples filing jointly, crossing the $218,000 MAGI threshold (2026 IRMAA, based on 2024 income) adds about $974 per year per person in Part B surcharges alone.

How RMDs affect your Social Security taxes

RMDs also interact with Social Security in a way most retirees don’t expect. The IRS taxes Social Security benefits based on your “provisional income” — your adjusted gross income plus any tax-exempt interest plus half of your Social Security benefit. When RMDs raise your AGI, they push more of your Social Security into taxable territory. Up to 85% of Social Security benefits can be taxable once provisional income exceeds $44,000 for joint filers ($34,000 for single filers).

This creates a compounding problem: a large RMD doesn’t just increase your tax bill on the distribution itself. It can simultaneously push a portion of your Social Security into a taxable bracket, trigger IRMAA surcharges two years later, and bump your ordinary income rate. Three separate hits from one mandatory withdrawal. This is precisely why the years before age 73 matter so much — Roth conversions during that window reduce future RMD income, which reduces the taxable share of Social Security, which keeps IRMAA thresholds in reach.

The RMD formula itself is pretty simple. Where it gets interesting is watching what happens over 10 or 20 years as the numbers compound.

Each year, you divide your December 31 account balance by the distribution period for your age. As you age, the divisor shrinks. So the percentage you must withdraw goes up whether you need the money or not.

A $1 million IRA through age 90

Here’s what happens to a $1 million traditional IRA starting at age 73, assuming 5% annual growth and RMDs taken each December.

Two patterns show up. First, the balance actually grows in the early years because 5% growth outpaces the 3.8% withdrawal rate. Second, by the mid-80s, RMDs overtake growth and the account starts shrinking. But you’re still pulling out $60,000+ per year, all of it taxable.

The tax bracket impact

RMDs don’t arrive in a vacuum. Here’s how a $50,000 RMD stacks on top of other income for a married couple filing jointly.

That $50,000 RMD didn’t just cost $50,000 × 22%. It pushed the couple from the 12% bracket into the 22% bracket, increasing the effective rate on all income above $96,950 (the 2025 MFJ threshold for the 22% bracket). And if their combined MAGI crosses $218,000, they’ll face IRMAA surcharges on Medicare premiums too.

The still-working exception

There’s one big exception to the age-73 rule. If you’re still employed and don’t own more than 5% of the company, you can delay RMDs from your current employer’s 401(k) until you actually retire. This doesn’t apply to IRAs or 401(k)s from past employers. Only your active workplace plan qualifies.

Rolling old 401(k)s into a current employer’s plan (if the plan allows it) can shelter more money from RMDs while still working. Once retirement happens, RMDs begin the following year.

Penalties for missed RMDs

Miss the deadline and the penalty is 25% of the amount you should have withdrawn. SECURE 2.0 cut this from the previous 50% penalty. If you correct the mistake within two years, the penalty drops further to 10%. Still, on a $40,000 RMD, that’s $4,000 to $10,000 in penalties on top of the taxes you’ll still owe on the distribution itself.

RMDs can’t be avoided entirely. But the tax bill they create isn’t fixed. The size of future RMDs depends on decisions made years earlier, and a few levers can reshape the outcome significantly.

The gap years: the biggest opportunity

The years between retirement and age 73 are often the lowest-income years in a retiree’s life. Work income has stopped, Social Security may not be at full benefit yet, and RMDs haven’t kicked in. That creates a rare window where the 12% or even 10% federal bracket might apply.

During these gap years, every dollar converted from a traditional IRA to a Roth is taxed at those lower rates and then grows tax-free forever. A $50,000 conversion at 12% costs $6,000 in taxes. That same $50,000 taken as an RMD later, when combined income pushes into the 22% bracket, costs $11,000. That’s $5,000 saved per $50,000 converted. And the converted money is permanently removed from the RMD calculation.

The typical approach is to “fill up” a target tax bracket each year rather than doing one massive conversion. For example, converting enough to reach the top of the 12% bracket ($96,950 of taxable income for married couples in 2025) keeps the tax cost low while steadily reducing the traditional balance. Spreading conversions across 5 to 10 years typically beats a single large conversion. Its also worth tracking where IRMAA thresholds fall, since a conversion that triggers a higher Medicare bracket two years later can eat into the savings.

Qualified charitable distributions

QCDs let anyone age 70½ or older transfer money directly from an IRA to a qualified 501(c)(3) charity. The 2025 annual limit is $108,000 per person ($111,000 in 2026), and the amount counts toward satisfying your RMD without showing up as taxable income. For people who already give to charity, routing those gifts through a QCD instead of writing checks from a bank account is almost always the more tax-efficient path.

But QCDs come with limits. The money must go directly from the IRA custodian to the charity. Donor-advised funds and private foundations don’t qualify. You can’t receive anything in return (no event tickets, no membership perks). And QCDs only make sense for people who are already charitably inclined. Donating $10,000 solely to avoid taxes on a $10,000 RMD doesn’t put you ahead financially, since the money is gone either way. QCDs shine when charitable giving is already part of the plan.

Other levers

Account drawdown sequencing can help even without Roth conversions. Strategically pulling from traditional accounts earlier in retirement, before age 73, fills up lower tax brackets that might otherwise go unused and shrinks the balance that future RMDs are calculated on.

First-year timing matters too. The choice between taking the first RMD in the year you turn 73 versus delaying to April 1 of the following year comes down to whether doubling up distributions in year two creates a worse tax outcome. For most people it does, but the math depends on individual circumstances.

For those already past 73, options narrow but don’t disappear. QCDs become the strongest tool for charitable givers. Roth conversions can still happen above the RMD amount (you must take the RMD first; it can’t be converted). And strategic sequencing of which accounts fund living expenses can still reduce lifetime taxes.

The IRMAA lookback deserves close attention in all of these scenarios. For 2026, IRMAA thresholds start at $109,000 (single) and $218,000 (married filing jointly), based on 2024 income. At the first tier, the Part B surcharge is $81.20 per month per person. Sometimes staying just under a threshold is worth more than squeezing in a slightly larger Roth conversion.

Understanding RMDs in theory is one thing. Seeing your own numbers is another. The calculator below projects your required distributions, estimates their tax impact, and models how pre-RMD strategies like Roth conversions could change the trajectory.

Quick Start Calculator

What to look for in the results

The projected RMD by year shows how the required withdrawal grows annually as the IRS distribution period shrinks. Watch for the crossover point where RMDs start to exceed investment growth. The estimated tax impact reveals how distributions stack on your other income and which bracket they push you into, showing whether you’re facing 12%, 22%, or higher rates on those dollars. If you’re under 73, the pre-RMD conversion opportunity section shows how much could be moved to Roth each year while staying within a target bracket. And the account balance trajectory tracks your projected balance through age 90+, making it clear whether the account grows, plateaus, or declines under different scenarios.

Disclaimer: This calculator provides estimates for educational purposes only. Actual RMDs depend on your exact account balances as of December 31 each year and the current IRS life expectancy tables. Tax calculations are simplified projections that don’t account for all deductions, credits, or state taxes. Consult a qualified tax professional or financial advisor before making decisions about Roth conversions, withdrawal timing, or retirement income planning. IRS rules and tax brackets are subject to change.

Answers to the questions that come up most often when planning for required minimum distributions.

RMD rules are set by the IRS and Congress and have changed multiple times in recent years (SECURE Act 2019, SECURE 2.0 Act 2022). The information above reflects rules in effect as of 2026. Always verify current rules with IRS Publication 590-B or a qualified tax advisor.