Should You Gift Above Your RMDs? Suze Orman’s Answer for Retirees With 17+ Years Left

On her July 18, 2024 podcast episode Ask KT & Suze Anything: I Want to Give Money to my Grandchildren, Suze Orman answered a listener named Jean who is roughly 73, financially comfortable, and being told by her financial advisor to start withdrawing above her required minimum distribution and gifting the extra to her beneficiaries now rather than at death. Suze said: “What I want you to do is not gift any money to your kids and grandkids right now whatsoever.”

I’ve been following Suze Orman’s retirement advice for years now, and this episode crystallizes something I think too many advisors get wrong. If you pull money out of a traditional IRA above what the IRS forces you to take, you pay ordinary income tax on every extra dollar, and once that money leaves the tax-advantaged wrapper, it stops compounding for you. Over a 17-year horizon, this can shave six figures off your own safety net.

The verdict: keep the money working, gift from the RMD only

Suze’s advice is sound, and I think the math proves it. Jean faces three choices: gift extra now, leave it in the traditional IRA, or convert the excess to a Roth. Suze rejected gifting extra and split the difference between keeping it invested and converting.

Her reasoning rests on what she calls the unknown future expense problem. As she put it, “You do not know what your life is going to be at 83, at 93, at 97, which is when my mom died. You don’t know what your expenses are going to be.” Long-term care, a private nurse, a medical event insurance does not fully cover. None of these show up on a spreadsheet at 73.

Consider a 73-year-old with $800,000 in a traditional IRA whose RMD is roughly $30,000 this year. The advisor says pull $50,000 and gift $20,000 of the excess. At a 22% federal bracket, that extra $20,000 withdrawal costs about $4,400 in tax before it reaches a grandchild. Over 17 years of doing the same thing, that is real money handed to the IRS for the privilege of giving money away early.

Suze’s counter is a Roth conversion. Take the same extra $20,000 above the RMD, pay the same $4,400 in tax, but move the after-tax amount into a Roth IRA in your own name. There are no RMDs on a Roth. The money compounds tax-free, you can touch it if a nursing home bill arrives, and the kids and grandkids inherit it tax-free at death. You get the legacy outcome without surrendering control while alive.

If you want to gift, gift from the RMD

Suze did concede one path. If Jean rarely spends the full RMD, that money is already out of the IRA and already taxed. “She’s not using it, she has to take it out. All right, so use it. Gift it, gift it.” The annual gift tax exclusion lets you give a meaningful amount per recipient per year with zero federal gift tax and no impact on your lifetime exemption. In a separate episode discussing a 75-year-old gifting to her son, Suze cited the figure as $18,000 a year per recipient, and the 2026 indexed number sits just above that. Multiply by however many children and grandchildren you have and the legal gifting room is substantial without touching principal.

The variable that changes the answer

The single factor that flips this decision is whether you actually need the RMD to live on. Jean said she seldom needs her entire RMD, but Suze caught the word seldom and pushed back: “Seldom isn’t I never use my entire RMD.”

If you genuinely never touch the RMD, I’d argue gifting that surplus is efficient. The tax is already paid, the cash is sitting in a brokerage account, and your beneficiaries use it during your lifetime. If you sometimes need part of it, gifting locks in a commitment your future self may regret. Long-term care in a private facility can run $100,000 a year or more. A Roth bucket you control is, in my view, a far better hedge than a check already cashed by your grandson.

What we should do this week

1. Pull your most recent IRA statement and calculate this year’s RMD using the IRS Uniform Lifetime Table. Confirm with your custodian.
2. Look at the last three years of spending. If you used 100% of the RMD even once, treat that as evidence you need the cushion.
3. Ask your CPA to model a Roth conversion of the amount above the RMD that keeps you inside your current bracket. Conversions stop being useful the moment they push you into the next one.
4. If you still want to gift, gift from the RMD cash that has already been taxed, and stay inside the annual exclusion per recipient so no gift tax return is required.
5. Name your kids and grandkids as beneficiaries on the Roth. They inherit it tax-free, and you keep every dollar accessible until you no longer need it.

Suze’s instinct is, to me, the right one for a comfortable 73-year-old with two decades of unknown medical math ahead. Gift what you cannot use, convert what you can spare, and keep the rest where it can still rescue you.