Required Minimum Distributions Can Wreck a Tax Plan. Here’s How Retirees Shrink Them.
A retiree who never needed the money still has to withdraw it, pay ordinary income tax on every dollar, and potentially watch Medicare premiums spike two years later. Several legal strategies can cut the damage, but each one comes with…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Picture a retiree who spent decades filling a 401(k), rolled it into a traditional IRA, and planned to live on Social Security plus modest withdrawals. Then the custodian’s statement arrives with a required withdrawal much larger than anything in the budget, and the IRS wants that money out whether the retiree needs it or not, and every dollar gets taxed as ordinary income.
That forced withdrawal is a required minimum distribution, or RMD. A big one can raise a retiree’s tax bracket, make more of Social Security benefits taxable, and lift Medicare premiums all at once. Several legal ways exist to reduce RMDs or soften the hit.
How the IRS Sets Your Required Withdrawal
The current edition is IRS Publication 590-B for tax year 2025. Anyone who reaches age 72 after December 31, 2022 must begin RMDs by April 1 of the year following the year you reach the age 73. Each later RMD is due by December 31.
Delaying that first withdrawal has a cost. If you take nothing in the starting year, you have to take required distributions for 2 years the following year, per IRS Publication 560. That puts two RMDs on one tax return.
The amount comes from a formula. Take the account balance at the close of business on December 31 of the prior year and divide it by a factor from an IRS life expectancy table. Most owners use the Uniform Lifetime Table, a chart of divisors that reduce with age: 26.5 at age 73, 20.2 at age 80, and 12.2 at age 90. The smaller the divisor, the bigger the share of the account you have to withdraw.
If you miss an RMD, you may owe a 25% excise tax on the amount you didn’t take. That drops to 10% if you withdraw the missed amount and file a return reporting the tax within the correction window, per Publication 575 for tax year 2025.
Why One Big RMD Can Trigger Three Tax Hits
Brackets. For tax year 2025, joint filers pay 12% on taxable income from $23,851 to $96,950 and 22% from $96,951 to $206,700. Single filers move from 12% to 22% above $48,475. The higher rate applies just to the dollars above each line, but an RMD sits on top of all your other income.
Social Security. The IRS adds half your benefits to your other income and compares the total with a base amount: $25,000 if you file as an individual and $32,000 for joint filers in tax year 2025. Above $34,000 ($44,000 if you are married filing jointly), up to 85% of benefits can be taxable. RMDs count as other income.
Medicare. The income-related monthly adjustment amount, or IRMAA, is a premium surcharge for higher-income enrollees. In 2026, the standard Part B premium is $202.90 a month for individuals with modified adjusted gross income up to $109,000 and joint filers up to $218,000. One dollar over the line raises the premium to $284.10, and a separate Part D surcharge comes on top. Medicare uses tax returns from two years earlier, so a big RMD year shows up in your premiums later.
Roth Conversions Shrink the Balance Before RMDs Start
Moving money from a traditional IRA to a Roth IRA reduces the balance future RMDs are based on. Roth IRAs have no RMDs while the owner is alive, per Publication 17 (2025).
The catch: Publication 590-B counts the converted amount as gross income in the year you convert. The best window is usually the years between retirement and the first RMD, when earned income has stopped but Social Security and RMDs haven’t yet started (we sized up that quiet period in a free Roth conversion guide). Convert just enough to fill a lower bracket while staying under an IRMAA threshold.
Charitable Retirees Can Send RMDs Straight to Charity
A qualified charitable distribution, or QCD, goes directly from your IRA trustee to an eligible charity and stays out of your taxable income. You must be at least age 70½ when the distribution is made, and the maximum annual exclusion is $108,000 for tax year 2025.
The catch: The money has to go straight from the trustee to the charity, and ongoing SEP and SIMPLE IRAs don’t qualify. You also can’t deduct the gift. Any deductible IRA contributions you made after age 70½ reduce the amount you can exclude.
Longevity Annuities Push Part of the Balance Past RMD Age
A qualified longevity annuity contract, or QLAC, is a deferred annuity bought inside an IRA or workplace plan that starts paying late in life. Money in a QLAC generally isn’t counted in the balance used to figure RMDs until the payments begin.
The catch: Federal rules cap how much you can put in, and the cap changes each year, and the money is locked up, and the annuity payments are taxable once they start.
Still Working at 73? Your Employer Plan Can Wait
Workplace plans can delay RMDs until April 1 of the first year after the later of the year you reach age 73 or the year you retire from that employer. That’s per Publication 560 for tax year 2025.
The catch: The delay doesn’t apply to anyone who owns 5% of the employer, and a plan can still require RMDs at 73. Traditional IRAs follow the age-73 schedule no matter what. The exception also covers only your current employer’s plan.
Early Withdrawals in Low-Income Years Flatten the Curve
Taking taxable withdrawals between retirement and 73, when other income is low, fills the cheaper brackets and leaves a smaller balance for future RMDs.
The catch: Taking more than the minimum in one year doesn’t earn credit toward later RMDs, according to Publication 590-B. Every extra dollar also raises the income Medicare and the Social Security formula look at.
No single move fits every retiree. QCDs work best for people who already give to charity, the still-working exception helps those on payroll past 73, and the years before RMDs begin are usually the cheapest time to convert. The interactions among brackets, Social Security and IRMAA are worth reviewing with a qualified tax professional before the first RMD arrives.
Contact [email protected] for any questions or corrections.
Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
