The RMD Mistake That Turns a $1.18 Million IRA’s $5,925 Monthly Paycheck Into a Bigger Tax Bill
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A retired couple learns they can push their very first required minimum distribution (RMD) into the following spring. An RMD is the withdrawal the IRS forces out of a traditional IRA every year. So they wait.
With a $1.18 million IRA, that delay can more than double the federal tax on those withdrawals. It also hits the same account that’s supposed to pay about $5,925 a month. Below you’ll see how the trap works and what six income holdings actually pay.
Waiting Until Spring Stacks Two Withdrawals Into One Year
If you were born between 1951 and 1959, your RMDs start at 73. The first one can wait until April 1 of the following year. Every later one is due by December 31. So if you delay the first, you take two in one year, and both count as ordinary income.
Take a married couple filing jointly. Assume the balance holds steady, the RMD is their only taxable income, and 2026 brackets apply. At 73, the Uniform Lifetime Table divisor is 26.5, which makes the first RMD about $44,528. At 74, the divisor is 25.5, so the second comes to about $46,275.
Take each one on time and, after the $32,200 standard deduction, both years stay in the 10% bracket. Two-year tax: about $2,640. Double up and $90,803 lands in one year. Income falls past $24,800 into the 12% bracket, and the bill hits about $6,536. Waiting costs roughly $3,896.
Add Social Security, and it gets worse. Higher income raises the taxable share of benefits under 26 U.S.C. § 86(b)[1]. Medicare’s income surcharge, called IRMAA, looks back two years. Joint filers above $218,000[2] pay $284 a month for Part B instead of $203.
Skipping an RMD costs a 25% excise tax on the shortfall. That drops to 10% if you fix it in time. You can also cover an RMD without selling shares. Let the dividends pile up as cash inside the IRA and withdraw that cash. The fix really starts years before that first withdrawal, which is the whole subject of our free first-year tax bomb guide.
What $1.18 Million Really Pays Each Month
At current prices and annualized payouts, the mix below yields about 5.8%. Roughly $68,330 a year, or $5,694 a month. It falls short of the $5,925 monthly target, though it still covers the first RMD on its own.
Option Premiums Fuel First Trust’s Income
First Trust BuyWrite Income ETF (NASDAQ:FTHI) holds large U.S. equities and writes S&P 500 call options to collect premiums. It makes up 15% of the portfolio, carries a yield near 9.2% and contributes about 24% of the income. The catch: writing calls limits your upside when stocks rally.
WisdomTree’s Biggest Weight Pays Uneven Checks
WisdomTree U.S. High Dividend Fund (NYSEARCA:DHS) tracks a fundamentally weighted index of high-dividend U.S. stocks. At 25%, it’s the largest weight. It carries a yield near 3.1% and provides 13% of the income. Its monthly payments have swung from $0.155 to $0.405 this year, so don’t treat it as a fixed paycheck.
Four Corners Now Pays Rent Income Monthly
Four Corners Property Trust (NYSE:FCPT) is a real estate investment trust that leases out restaurants, auto shops, and vet clinics. The tenants cover property costs. It’s a 15% weight, carries a yield near 6.6% and provides 17% of the income. Monthly dividends began in July, and the latest payment rose to $0.1265.
Gladstone’s Monthly Payout Lost Its Supplemental Boost
Gladstone Investment (NASDAQ:GAIN) lends to and invests in small private businesses as a BDC. It’s a 15% weight. Its regular $0.08 monthly payout carries a yield near 6.5% and provides 17% of the income. Supplementals reached $0.70 in 2024, and $0.54 in 2025, but none have shown up in 2026
Plains All American Brings a K-1 Tax Wrinkle
Plains All American Pipeline (NASDAQ:PAA | PAA Price Prediction) is a pipeline partnership that moves crude oil and natural gas liquids. It carries a 15% weight, yields about 6.8%, and is good for 18% of the income. It issues a K-1 partnership tax form. Inside an IRA, partnership business income can count as unrelated business taxable income. At $1,000 or more, the IRA must file Form 990-T.
Floating Rate Bonds Pay Less as Rates Fall
iShares Floating Rate Bond ETF (CBOE:FLOT) holds investment-grade bonds whose interest resets with short-term rates. It has a 15% weight, carries a yield near 4.4%, and provides 11% of the income. When short-term rates fall, its income falls too. Monthly payouts have dropped from above $0.20 for most of 2025 to about $0.19.
Mark April 1 and December 31 Now
To keep that $5,694 monthly paycheck from costing an extra $3,896 in federal tax, take the first RMD by December 31 of the year you turn 73 so the two land in separate tax years.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
