Many retirees spent 2025 hoping the One Big Beautiful Bill would shrink or scrap Required Minimum Distributions. The law rewrote brackets, made the higher standard deduction permanent, and added a new senior bonus deduction, but RMD rules sit exactly where SECURE 2.0 left them. For someone with a seven-figure traditional 401(k), that omission is the single most expensive line item in the entire bill.
The Situation Most 73-Year-Olds Now Face
A retiree turns 73, has done everything right, and suddenly the IRS forces money out of a tax-deferred account whether it is needed or not. RMDs still begin at age 73 for those born 1951 through 1959, and at 75 for anyone born in 1960 or later. The amount is set by an IRS life-expectancy table, regardless of lifestyle.
The compact version of the scenario most readers recognize:
- Age: 73, first RMD year
- Traditional 401(k) or IRA balance: roughly $1.5 million
- Other income: Social Security plus modest pension or dividends
- Filing status: Married filing jointly, standard deduction
- The decision: How to keep RMDs from triggering a multi-decade tax avalanche
The average Baby Boomer 401(k) balance was $267,900 in Fidelity’s Q3 2025 data, and the people writing into advice columns are usually well above that. Suze Orman’s listeners regularly call in with $2 million IRAs, asking what to do about RMDs they do not need. The money has to come out. The only open question is how much of it the federal government keeps.
Why the Tax Bill Drives Everything
A $1.5 million traditional balance produces a first RMD of about $56,604 at age 73. Stack that on top of Social Security, a pension, and a couple lands squarely in the 22% to 24% marginal bracket. The 2026 standard deduction for joint filers is $32,200, and the 24% bracket begins at $211,400 of taxable income for joint filers. Add IRMAA surcharges on Medicare Parts B and D once income crosses the next threshold, and state income tax on top.
The new $6,000 senior bonus deduction (per qualifying taxpayer 65 and older, phasing out at 6% above $75,000 single or $150,000 joint MAGI) trims a few hundred dollars off the annual bill. It does not move the needle on a $400,000 lifetime tax exposure.
Inflation is the quiet accelerant. Headline PCE inflation ran nearly 4% year-over-year in April 2026, with services inflation stuck near 3.5%. Higher nominal income from rising portfolios pushes more RMD dollars into higher brackets every year.
The Three Levers That Actually Work
- Roth conversions in the 60s. The window between retirement and age 73 is the only stretch where a retiree controls taxable income. Converting $50,000 to $100,000 a year while filling up the 22% bracket permanently shrinks the future RMD base. Suze Orman’s standard advice to a 72-year-old caller was to convert as much as possible before RMDs begin, because once they start, conversions must come after the RMD is taken.
- Qualified Charitable Distributions after 70.5. A QCD sends IRA dollars directly to a charity, counts toward the RMD, and never hits adjusted gross income. The 2026 QCD limit is $111,000 per person. For charitably inclined retirees, this is the most efficient dollar in the tax code.
- State tax migration and HSA stacking. Moving from a 6% state to a no-income-tax state saves roughly $3,400 a year on a $56,604 RMD. HSAs continue to cover Medicare premiums and qualified medical costs tax-free, reducing the RMD dollars that have to fund healthcare.
What To Do This Week
If retirement is still in the 60s, model a Roth conversion that fills the 22% or 24% bracket every year until RMDs begin. The costly mistake is waiting until 72 and discovering that conversions now sit on top of a forced RMD instead of replacing one.
If RMDs have already started and giving is part of the plan, route the charitable portion through a QCD before writing checks from a taxable account. The 10-year Treasury near 4.5% means safe bond yields are finally meaningful again, which makes the after-tax value of every preserved IRA dollar higher than it was three years ago.
The OBBB (One Big Beautiful Bill) did not fix RMDs. The retirees who plan around that fact keep six figures more than the ones who waited for Washington to act.
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