Required Minimum Distributions: Planning Ahead to Minimize the Tax Hit
RMDs can push you into higher tax brackets and trigger IRMAA surcharges. Learn pre-RMD strategies — Roth conversions, QCDs, and multi-year planning — to keep more of your money.
Required Minimum Distributions (RMDs) are mandatory annual withdrawals from tax-deferred retirement accounts like traditional IRAs and 401(k)s, beginning at age 73. The IRS requires these withdrawals to ensure deferred taxes are eventually paid—and the amounts increase each year as you age.
Key Takeaways
RMDs are a tax problem, not just a withdrawal rule. Each distribution adds to your taxable income, potentially pushing you into higher brackets and triggering Medicare surcharges (IRMAA) that persist for years.
The real planning window is before age 73. The years between retirement and your first RMD—often called the “gap years”—offer a unique opportunity for Roth conversions at lower tax rates.
RMD percentages increase every year you age. At 73, you withdraw about 3.8% of your balance. By 90, that jumps to over 8%—meaning the IRS takes a bigger bite each year regardless of your needs.
Charitable givers have a powerful tool: QCDs. Qualified Charitable Distributions let you send up to $105,000 per year directly to charity from your IRA, satisfying your RMD without increasing your adjusted gross income.
73
RMD Starting Age (SECURE 2.0)
$37,736
First-Year RMD on $1M
25%
Penalty for Missed RMD
$105,000
Annual QCD Limit
What Is It — Required Distributions From Tax-Deferred Accounts
Think of a traditional IRA or 401(k) as a partnership with the IRS. For decades, you’ve been the silent partner—contributing money, watching it grow, and paying no taxes 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.” The longer you waited, the bigger the bill—and unlike most bills, this one grows larger every year you delay.
Which Accounts Require RMDs?
Not all retirement accounts play by the same rules. Understanding which accounts trigger RMDs—and which don’t—is the foundation of tax-efficient retirement planning.
Accounts WITH RMDs
- • Traditional IRAs — Always subject to RMDs at 73
- • 401(k), 403(b), 457(b) — RMDs required unless still-working exception applies
- • SEP IRAs and SIMPLE IRAs — Treated like traditional IRAs
- • Inherited IRAs — Different rules, often faster distribution requirements
Key point:
Every dollar withdrawn is taxable income
Accounts WITHOUT RMDs
- • Roth IRAs — No RMDs during owner’s lifetime
- • Roth 401(k)s — No RMDs starting in 2024 (SECURE 2.0)
- • Health Savings Accounts — No RMDs ever
- • Taxable brokerage accounts — No mandatory distributions
Key point:
Withdraw only what you need, when you need it
The Age 73 Trigger
Thanks to SECURE 2.0, the RMD starting age is now 73 for anyone born between 1951 and 1959, and will rise to 75 for those born in 1960 or later. 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.
The April 1 Trap
Delaying your first RMD to April 1 of the following year might seem attractive, but it forces you to take two RMDs in the same calendar year—your delayed first-year distribution plus your 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 $38,000 spread across two years.
Why RMDs Create a Tax Problem
RMDs don’t exist in isolation. They stack on top of your other income—Social Security benefits, pensions, part-time work, investment income—potentially pushing you into higher tax brackets. A $50,000 RMD might be taxed at 22% or 24% federally, not the 12% bracket you’d face on your first dollars of income.
Even worse, higher income can trigger Medicare’s Income-Related Monthly Adjustment Amount (IRMAA), adding hundreds of dollars per month to your Part B and Part D premiums. Unlike taxes, which are based on the current year, IRMAA looks back two years—so a single high-income year can haunt you with higher premiums well into the future.
The Aggregation Rule
If you have multiple traditional IRAs, you calculate a separate RMD for each account—but you can withdraw the total from any combination of IRAs you choose. This gives you flexibility to drain one account while preserving another, or to take distributions from whichever account has underperformed. However, 401(k)s don’t aggregate with IRAs: each 401(k) requires its own separate distribution.
How It Works — The Tables, Deadlines, and Tax Impact
RMDs aren’t arbitrary—they’re calculated using IRS tables designed to distribute your account balance over your remaining life expectancy. The math is straightforward, but the implications compound over time in ways that catch many retirees off guard.
The RMD Formula
RMD = Account Balance (Dec 31 prior year) ÷ Distribution Period
The distribution period comes from the IRS Uniform Lifetime Table, which assumes a beneficiary exactly 10 years younger than you. If your spouse is your sole beneficiary and is more than 10 years younger, you use the Joint Life Expectancy Table for a smaller RMD.
The Uniform Lifetime Table
Each year, you divide your December 31 account balance by the distribution period for your age. As you age, the divisor shrinks—meaning the percentage you must withdraw increases steadily.
| Age | Distribution Period | Withdrawal Rate | RMD on $1M |
|---|---|---|---|
| 73 | 26.5 years | 3.77% | $37,736 |
| 75 | 24.6 years | 4.07% | $40,650 |
| 80 | 20.2 years | 4.95% | $49,505 |
| 85 | 16.0 years | 6.25% | $62,500 |
| 90 | 12.2 years | 8.20% | $81,967 |
*Based on IRS Uniform Lifetime Table (updated 2022). Withdrawal rate = 1 ÷ Distribution Period.
Practical Takeaway
Notice how the withdrawal rate nearly doubles from age 73 to 90. Even if your account balance stays flat, your RMDs—and the taxes on them—will grow substantially each year. This is why reducing your traditional IRA balance before RMDs begin can have such a powerful long-term impact.
A $1 Million IRA Through Age 90
Let’s trace what happens to a $1 million traditional IRA starting at age 73, assuming 5% annual growth and RMDs taken each December.
| Age | Starting Balance | RMD | Year-End Balance |
|---|---|---|---|
| 73 | $1,000,000 | $37,736 | $1,010,377 |
| 75 | $1,017,182 | $41,349 | $1,024,124 |
| 80 | $1,027,689 | $50,875 | $1,025,655 |
| 85 | $945,612 | $59,101 | $930,836 |
| 90 | $739,218 | $60,592 | $712,557 |
*Assumes 5% annual growth, RMDs taken at year-end. Actual results vary with market performance.
Two patterns emerge: First, your balance actually grows in early years because 5% growth exceeds the 3.8% withdrawal rate. Second, by your mid-80s, RMDs outpace growth and the account begins declining—but you’re still taking $60,000+ distributions, all 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:
Without the RMD
- • Social Security (taxable): $28,000
- • Pension income: $24,000
- • Investment income: $8,000
- Total taxable income: $60,000
Marginal tax bracket:
12%
Federal income tax: ~$6,700
With a $50,000 RMD
- • Social Security (taxable): $28,000
- • Pension income: $24,000
- • Investment income: $8,000
- • RMD: $50,000
- Total taxable income: $110,000
Marginal tax bracket:
22%
Federal income tax: ~$13,200 (+$6,500)
That $50,000 RMD didn’t just add $50,000 × 22% = $11,000 in taxes. It pushed the couple from the 12% bracket into the 22% bracket, increasing their effective rate on all income above $94,300 (2024 brackets). And if their income exceeds $206,000, they’ll trigger IRMAA surcharges on Medicare premiums.
The Still-Working Exception
There’s one significant exception to the age-73 rule: if you’re still working 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 former employers—only your active workplace plan.
Practical Takeaway
If you’re planning to work past 73, consider rolling old 401(k)s into your current employer’s plan (if permitted) to shelter more money from RMDs. Once you retire, RMDs begin the following year.
The Penalty for Missing RMDs
Miss your RMD deadline, and the penalty is steep: 25% of the amount you should have withdrawn. SECURE 2.0 reduced this from the previous 50% penalty, and if you correct the error within two years, the penalty drops to 10%. Still, on a $40,000 RMD, that’s $4,000 to $10,000 in avoidable penalties—on top of the taxes you’ll still owe.
What It Means for You — Pre-RMD Strategies to Keep More
You can’t avoid RMDs entirely, but you can reshape them. The key is recognizing which levers you control—and pulling them at the right time, often years before your first RMD is due.
The Four Levers You Control
1. Pre-73 Roth Conversions
Convert traditional IRA dollars to Roth during the "gap years" between retirement and age 73. You pay taxes now at potentially lower rates, reducing your future RMD base permanently. Every dollar converted is a dollar that will never face RMDs.
2. Qualified Charitable Distributions
If you're 70½ or older and charitably inclined, QCDs let you transfer up to $105,000 per year directly from your IRA to qualified charities. This satisfies your RMD without adding to your adjusted gross income—a double win for tax efficiency.
3. Account Drawdown Sequencing
Strategically withdraw from traditional accounts earlier in retirement (before 73) when your income may be lower. This reduces your RMD base and fills up lower tax brackets that might otherwise go unused.
4. First-Year Timing Strategy
Decide whether to take your first RMD in the year you turn 73 or delay to April 1 of the following year. Delaying doubles up distributions in year two—usually a bad trade, but worth modeling for your specific situation.
The Gap Years: Your Biggest Opportunity
The years between retirement and age 73 are often your lowest-income years. You may have stopped working, aren’t yet claiming Social Security at full benefit, and RMDs haven’t kicked in. This creates a rare window where you might be in the 12% or even 10% federal bracket.
During these gap years, every dollar you convert from traditional to Roth IRA is taxed at these lower rates—and then grows tax-free forever. A $50,000 conversion at 12% costs you $6,000 in taxes. That same $50,000 taken as an RMD later, when you’re in the 22% bracket, costs $11,000. You save $5,000 per $50,000 converted—and eliminate future RMDs on that money entirely.
Pro Tip
When planning Roth conversions, calculate how much you can convert before hitting the next tax bracket or triggering IRMAA. Often the optimal strategy is to “fill up” the 12% or 22% bracket each year rather than doing one large conversion. Spreading conversions across 5–10 years typically beats a single large conversion.
Reality Check: QCDs Aren’t for Everyone
Qualified Charitable Distributions sound perfect on paper, but they come with limitations. You must be at least 70½ (not 73). The money must go directly from your IRA to a 501(c)(3) organization—not to donor-advised funds or private foundations. And you can’t receive anything in return, including event tickets or membership benefits.
QCDs also only make sense if you’re already charitably inclined. If you weren’t planning to give $10,000 to charity anyway, doing so just to avoid taxes isn’t a net win. But if charitable giving is already part of your plan, routing it through QCDs instead of writing checks from your bank account is almost always the smarter move.
IRMAA Reality Check
Medicare’s Income-Related Monthly Adjustment Amount (IRMAA) uses your income from two years prior. A large RMD in 2024 affects your Medicare premiums in 2026. For married couples, crossing the $206,000 MAGI threshold (2024) adds $839.40 per year per person in Part B surcharges alone. Factor this into your Roth conversion and drawdown planning—sometimes it’s worth staying just under an IRMAA threshold even if it means a smaller conversion.
What If You’re Already 73 or Older?
If you’re past the gap years, you still have options—they’re just more limited. QCDs become your most powerful tool if you give to charity. You can still do Roth conversions above your RMD amount (you must take the RMD first; it can’t be converted). And strategic sequencing of which accounts you draw from for spending can still minimize lifetime taxes.
Focus on avoiding unnecessary tax spikes. If you have a year with unusually low income (perhaps before claiming Social Security), that’s a year to consider a larger Roth conversion. If you have a year with unusually high income (selling a property, realizing capital gains), minimize additional withdrawals from traditional accounts beyond the required minimum.
The Bottom Line
RMDs are mandatory, but the tax bill they create is not fixed. Every year you reduce your traditional IRA balance before 73—through strategic conversions, thoughtful drawdowns, or qualified charitable distributions—you shrink every future RMD and the taxes that come with it. The best RMD strategy is one you start years before your first RMD is due.
Try It Out — Project Your RMD Schedule
Understanding RMDs in theory is one thing—seeing your own numbers is another. Use the calculator below to project your required distributions, estimate their tax impact, and model how pre-RMD strategies like Roth conversions could change your trajectory.
Quick Start Calculator
This Year’s RMD
$18,868
RMD % of Balance
3.8%
Balance After RMD
$481,132
Next Year Est.
$19,811
RMD & Balance Projection
What to Look For in the Results
Projected RMD by Year
See how your required withdrawal grows annually as the IRS distribution period shrinks. Watch for the crossover point where RMDs begin to exceed your investment growth.
Estimated Tax Impact
Understand how RMDs stack on your other income and which tax bracket they push you into. This reveals whether you're facing 12%, 22%, or higher rates on your distributions.
Pre-RMD Conversion Opportunity
If you're under 73, see how much you could convert to Roth each year while staying within your target tax bracket. This is your window to reshape future RMDs.
Account Balance Trajectory
Track your projected balance through age 90+. See whether your account grows, plateaus, or declines—and how different strategies affect the path.
Disclaimer: This calculator provides estimates for educational purposes only. Actual RMDs depend on your exact account balances as of December 31 each year and 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.
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