A 72-Year-Old With a $750,000 IRA Faces Their First RMD Next Year. October Is the Time to Plan It
The IRS hands a 72-year-old with a large traditional IRA one last window to shape their future tax bills before the rules lock in, and most retirees waste it by waiting until the deadline feels urgent.
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A 72-year-old with $750,000 in a traditional IRA can still shape the size of a first required minimum distribution, but only until Dec. 31. After that date, the IRS sets the starting number, and the remaining choices get narrower and more expensive.
One Year Out From Mandatory Withdrawals
Required minimum distributions (RMDs) are withdrawals the IRS forces you to take from pretax retirement accounts. Under current law, they begin at age 73 for those born between 1951 and 1959. Someone who is 72 today turns 73 in 2027, which makes 2027 the first distribution year.
Many retirees feel stuck here because the rules look simple while the timing choices quietly carry over into taxes and Medicare premiums years later. The calculation uses the account value at the close of business on December 31 of the prior year. This December’s balance sets the first withdrawal.
| Item | Scenario |
|---|---|
| Age | 72 now, 73 in 2027 |
| Traditional IRA | $750,000, all pretax |
| Balance that sets the first RMD | December 31, 2026 |
| Estimated first RMD | About $28,300 |
| Core decision | Reduce the balance now, or let it ride into RMDs |
The factor comes from the IRS Uniform Lifetime Table, which sets 26.5 at age 73. Divide $750,000 by 26.5 and the first RMD comes out to roughly $28,300. Every dollar is taxed as ordinary income, just like a paycheck.
Skipping it is costly. The IRS charges a 25% excise tax on the amount not withdrawn, dropping to 10% if corrected within two years. On this account, a full miss runs about $7,075.
Why the April Extension Usually Backfires
The biggest factor here is when income lands, and the first-year deadline is the trap. Your first RMD can wait until April 1 of the year after you turn 73, which here means April 1, 2028. The 2028 RMD is still due by Dec. 31, 2028. Delay the first one and two withdrawals hit the same tax year, roughly $56,600 on this balance.
Brackets are where that clustering hurts. For 2026, a single filer pays 22% on taxable income over $50,400 and 24% over $105,700. Add Social Security, which is tracking toward a 3.3% raise for 2027, and a doubled up RMD year can push a retiree into a higher bracket.
Medicare then sends a second bill. Premiums are based on income from two years prior. In 2026, single filers above $109,000 in modified adjusted gross income ($218,000 joint) pay an extra $81.20 a month for Part B. A clustering 2028 shows up on 2030 Medicare bills.
Three Paths, Ranked
- Take the first RMD during 2027: This spreads income across two tax years and keeps each year’s total lower. It works for most retirees whose income is steady from year to year.
- Delay to April 2028: This only pays off if 2027 income will be unusually high, such as a final year of wages or a large capital gain. In most cases, it simply piles two years of withdrawals into one return. It is the worst option for a typical retiree.
- Convert part of the IRA to a Roth before December 31: Every dollar converted leaves the pretax balance before the valuation date. Each $100,000 converted reduces the first RMD by about $3,774 and lowers every RMD after it. The cost is tax today: around $22,000 federal if the full $100,000 lands in the 22% bracket. Conversion income also counts toward 2028 Medicare premiums.
Timing gives 2026 an edge over later years. Once RMDs start, the required amount must come out before any dollars can be converted, so this year is the last clean window to convert without that limit (we sized up this gap between the last paycheck and the first RMD in a free guide to the Roth conversion window).
What to Do Before Year End
First, project your 2026 taxable income now. Add Social Security, pensions, interest and any gains, then find how much room is left before the next bracket and before the Medicare surcharge line.
The most common mistake is treating the April extension as free extra time. It amounts to a decision to double up taxable income in a single year, and it often costs both a higher bracket and a Medicare surcharge two years later.
My view: the single move worth making before Dec. 31 is a partial Roth conversion sized to fill your current bracket without crossing the $109,000 single or $218,000 joint Medicare threshold. Then plan to take the first RMD during 2027. Converting now reduce the balance that sets the first RMD, and it locks in today’s rates on money that will be taxed eventually anyway. Waiting until next year means the conversion has to share room with the first RMD.
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Joel South covers large-cap stocks, dividend investing, and major market trends, with a focus on earnings analysis, valuation, and turning complex data into actionable insights for investors.
He brings more than 15 years of experience as an investor and financial journalist, including 12 years at The Motley Fool, where he served as an investment analyst, Bureau Chief, and later led the Fool.com investing news desk. He has also co-hosted an investing podcast and appeared across TV and radio discussing market trends.
