The RMD Hack That Can Save Retirees Thousands

A lot of people opt to save for retirement in a traditional IRA or 401(k) without really thinking about the long-term consequences. And that’s understandable.

When you’re presented with the option to shield some of your income from taxes right away, it’s natural to take it. But what inevitably happens is that down the line, you find yourself subject to required minimum distributions, or RMDs, if your money is in a traditional retirement account.

RMDs aren’t automatically a problem. Let’s say you’re forced to take a $24,000 RMD this year, but you need $2,000 a month from your savings to supplement your Social Security checks and cover your retirement costs. In that case, being forced to take that money out of your savings is irrelevant — you’d be doing it anyway.

RMDs become more of a problem when you don’t need the money and are forced to take withdrawals. That’s because those withdrawals automatically create a tax bill — and a potentially large one at that.

But there’s one move you can make to avoid having to pay taxes on your RMDs. And it’s worth considering if you’re already on the hook for a large amount of taxes and you need to shrink your IRS bill.

Donate your RMD to charity the right way

Not only can RMDs create taxes for you, but because they add to your taxable income, they can have other unwanted consequences.

For one thing, the higher your taxable income, the more likely you are to face taxes on your Social Security benefits. And if your income is high enough, you could also end up having to pay more for Medicare.

That’s why it’s important to minimize RMD taxes or avoid them completely. And you can do that by giving your RMD to charity the right way.

If you do what’s called a qualified charitable distribution, or QCD, you can satisfy your RMD without increasing your tax bill. But to pull off a QCD, your money needs to go from your IRA to a qualifying charity directly.

You should also know that you cannot make a QCD out of a 401(k). If you’re interested in utilizing this tax strategy, you’ll need to initiate a rollover from your 401(k) into an IRA and then donate the money to charity directly.

You should also know that QCDs do have limits that change every year. In 2026, you can make a QCD of up to $111,000.

That’s a per-person limit, though. If you’re married and both you and your spouse have to take RMDs, you can each make a QCD of up to $111,000. So all told, you and your spouse can potentially avoid taxes on up to $222,000 that may need to come out of your retirement savings.

Don’t resign yourself to a hefty tax bill

RMDs are unavoidable unless you convert your traditional retirement savings to a Roth account before they come into play. And those conversions can be costly from a tax perspective.

If you don’t need your RMD, QCDs are a great way to support a meaningful cause while easing your tax burden. Just make sure to follow the rules so you’re able to make the most of this strategy.