Why timing your RMDs matters
Required Minimum Distributions (RMDs) are taxable withdrawals from tax-deferred retirement accounts. How and when you take them affects your income tax bill, Social Security taxation, Medicare Part B/D premiums (IRMAA), and eligibility for tax credits. Thoughtful timing can lower lifetime taxes, reduce bracket creep, and preserve more after-tax assets for heirs (IRS — Retirement Topics: RMDs).
Below are practical, IRS-aligned strategies and examples to help you plan RMDs with tax efficiency in mind. This article explains current rules, common pitfalls, and step-by-step tactics you can use or discuss with your financial or tax advisor.
Current rules you need to know
- RMD age: Under the SECURE 2.0 Act, the RMD starting age increased from 72. For most people the required beginning age is now 73 (for those who reach age 72 after December 31, 2022). The age will rise to 75 for those who reach age 74 after December 31, 2032. Always confirm the age that applies to your birth year with the IRS guidance. (IRS — Retirement Topics: RMDs; SECURE 2.0 summary.)
- Calculation date: The RMD is calculated using the retirement account balance as of December 31 of the prior year divided by your IRS life-expectancy factor for the current year.
- First-year flexibility: You may be allowed to delay your first RMD until April 1 of the year after you hit the RMD age. That choice requires care because it creates two taxable distributions in the same calendar year (the delayed first-year RMD and the next year’s RMD), which can push you into a higher bracket.
- Penalty for missed RMDs: SECURE 2.0 reduced the excessive withdrawal excise tax. The penalty was cut from 50% to 25% of the missed amount, and further reduced to 10% if you correct the shortfall in a timely manner under IRS rules. Review current IRS guidance for procedural steps to correct missed RMDs.
(References: IRS Retirement Topics — Required Minimum Distributions.)
Basic RMD calculation example
If your Traditional IRA had a December 31 balance of $200,000 and your life-expectancy divisor is 25.6, your RMD would be $200,000 ÷ 25.6 = $7,812.50 for that year. You must withdraw at least that amount by December 31, or face an excise tax on the shortfall (IRS calculation rules).
Practical strategies to minimize taxes
The tactics below are commonly used in practice. Each has trade-offs and should be evaluated with your tax situation in mind.
1) Time the first-year RMD carefully
- Pros: Delaying the first RMD until April 1 can postpone taxable income if you expect a lower tax situation in that later year.
- Cons: Two RMDs in one year can produce a higher combined tax bill and increase Medicare Part B/D surcharges or Social Security taxability. Run a quick projection before electing the April 1 option.
2) Use partial Roth conversions before RMD age
- How it helps: Converting some traditional IRA funds to a Roth IRA removes future RMD obligations on the converted amount (Roth IRAs have no lifetime RMD for the original owner) and shifts income to years you control.
- When it makes sense: If you have a low-income year or can fill a lower tax bracket without pushing into higher brackets, partial conversions can reduce future RMDs and taxable income.
- Caution: Converted amounts are taxable in the conversion year and may affect Medicare premiums and tax credit phaseouts. (See our guide on Roth conversion timing: Roth Conversion Windows.)
3) Consider Qualified Charitable Distributions (QCDs)
- Overview: For individuals age 70½ or older (check current IRS age thresholds), a QCD allows a direct transfer from an IRA to a qualified charity and the amount is excluded from taxable income while still satisfying the RMD.
- Benefit: QCDs can reduce taxable income without itemizing deductions and can be especially useful if you don’t need the distribution for living expenses.
- Implementation: Work with your custodian to transfer funds directly to the charity and obtain written confirmation for tax records. (IRS — QCD guidance.)
4) Bunching and tax-bracket management
- Technique: Increase withdrawals in years when your other income is low to take advantage of lower tax brackets. Conversely, delay nonessential withdrawals in higher-income years.
- Combined tools: Pair bunching with Roth conversions and QCDs to smooth taxable income across years.
5) Aggregate IRA RMDs, but treat employer plans separately
- IRAs: If you have multiple traditional IRAs, calculate the RMD for each but you may withdraw the total across any one or more IRAs in aggregate.
- Employer plans: RMDs from 401(k) or other employer plans must generally be taken separately from each plan (unless you roll the plan balance to an IRA, which then allows aggregation). Confirm plan-specific rules.
6) Coordinate RMDs with Social Security and IRMAA planning
- Timing matters: Additional taxable income from RMDs can increase the portion of Social Security subject to tax and can raise Medicare Part B and D premiums through IRMAA surcharges.
- Action: Model how different RMD timing scenarios affect provisional income and Medicare premiums, especially in the years when pre-Medicare earnings cease.
7) Consolidation and account location
- Consolidate where it simplifies: Rolling old 401(k)s into an IRA prior to RMDs can simplify RMD calculations and allow flexibility in which accounts to tax first.
- Asset location: Hold assets expected to generate high taxable income inside tax-advantaged accounts and low-tax assets in taxable accounts.
Inherited IRAs and special rules
- Post-SECURE Act: Most non-spouse beneficiaries must withdraw the entire inherited IRA within 10 years unless they qualify as an eligible designated beneficiary. Inherited account RMD rules differ markedly from owner RMD rules — they often have no annual RMD but a 10-year distribution deadline.
- Spousal exceptions: Surviving spouses have rollover and spousal-beneficiary options that can change timing and tax outcomes. Consult a specialist for inherited account planning.
(Reference: IRS guidance on inherited IRAs and SECURE Act changes.)
Common mistakes I see in practice
- Waiting until December and then missing paperwork or the correct amount. Take your RMD early in the year to avoid errors.
- Forgetting employer-plan RMD rules — you may not be able to aggregate a 401(k) RMD with IRA RMDs.
- Doing large Roth conversions without modeling the Medicare premium and tax-credit impact.
In my practice, a simple annual checklist — calculating the RMD early, confirming custodian procedures, and running a tax-bracket projection — prevents nearly all common mistakes.
Example scenarios
1) Single retiree, delay-first-year trade-off: Jane turns 73 in 2025 and delays her first RMD to April 1, 2026. Because she also needs the 2026 RMD, she ends up taking two distributions in 2026 and moves into a higher bracket, increasing her Medicare Part B premium. A model showed taking the RMD in 2025 reduced her lifetime taxes.
2) Partial Roth conversion sequence: Mark had low taxable income for two years after he retired. He converted $40,000 in year one and $30,000 in year two to Roth, filling his 12% and 22% brackets without jumping higher. This reduced his traditional IRA balance and future RMDs.
3) QCD for charitable giving: A client with a $50,000 RMD and planned $20,000 charitable gift used a $20,000 QCD to satisfy part of the RMD, lowering taxable income and preserving itemized deduction decisions.
Implementation checklist
- Confirm the RMD starting age that applies to your birth year using current IRS guidance.
- Calculate RMDs early (use 12/31 prior-year balance) and document calculations.
- Model tax and Medicare premium effects of different timing scenarios.
- Consider partial Roth conversions in low-income years and document tax projections.
- Explore QCDs if you give to charity and they are eligible recipients.
- Coordinate 401(k) and IRA consolidation decisions before RMD year if aggregation would help.
- Keep records and obtain custodian confirmations for all distributions.
Further reading and internal resources
- Read our primer on Required Minimum Distribution (RMD) for calculation basics and recent updates: Required Minimum Distribution (RMD) (https://finhelp.io/glossary/required-minimum-distribution-rmd/).
- Practical, case-based guidance: How Required Minimum Distributions (RMDs) Work in Practice (https://finhelp.io/glossary/how-required-minimum-distributions-rmds-work-in-practice/).
- If you are considering Roth conversions, see Roth Conversion Windows: When to Convert for Long-Term Tax Efficiency (https://finhelp.io/glossary/roth-conversion-windows-when-to-convert-for-long-term-tax-efficiency/).
Authoritative sources
- IRS — Retirement Topics: Required Minimum Distributions (RMDs). See official IRS pages for the latest rules and calculators.
- IRS — Qualified Charitable Distributions (QCDs).
- SECURE 2.0 Act summaries and IRS guidance on changes to RMD age and excise tax reductions.
Professional disclaimer
This article is educational only and does not constitute tax, legal, or financial advice. Rules for RMDs, QCDs, Roth conversions, and beneficiary distributions change; consult the IRS and a qualified tax or financial advisor before making decisions specific to your situation.
If you’d like, I can run a simple two-year RMD timing projection or show a Roth conversion example spreadsheet you can adapt to your numbers.
