Retirement · 6 min read · 2026-02-11
The 9-step RMD optimization.
RMDs are mandatory but the impact is manageable. Nine steps reduce the bracket and Medicare premium hit.
RMDs at 73 force taxable income most retirees would prefer to defer.
RMDs begin at age 73 (post-SECURE 2.0) and grow as a percentage of balance each year. For retirees with substantial pre-tax balances, the RMDs alone can push household income into higher tax brackets and IRMAA tiers. The screen produces strategies to manage this.
The nine indicators
The nine steps to manage RMDs.
Each is an actionable strategy. The composite reduces lifetime tax liability and preserves income flexibility through retirement.
Pre-RMD Roth conversion years
Window: ages 60–73
Years between retirement and RMD age are conversion windows. Reduce future RMDs by shrinking the pre-tax balance.
QCDs once 70½ or older
Limit: $105K (2026)
QCDs satisfy RMD requirements without adding to AGI. Ideal for charitably-inclined retirees.
RMD timing within the year
Pattern: Q4 vs full-year
RMDs can be taken any time during the year. Late-year timing allows for income-management decisions.
Aggregation rules across IRAs
Pattern: aggregate calculation
RMDs from multiple traditional IRAs can be taken from any single account. 401(k) RMDs cannot be aggregated.
Spouse-as-beneficiary planning
Pattern: lifetime stretch
Spouse beneficiaries can roll inherited IRAs into their own, deferring RMD until their own age 73.
Non-spouse 10-year rule (SECURE Act)
Pattern: full liquidation in 10 years
Non-spouse beneficiaries must liquidate inherited IRAs within 10 years. Plan distributions to manage beneficiary tax brackets.
Asset location optimization for RMD-eligible accounts
Pattern: bonds in pre-tax
Holding bonds and other ordinary-income assets in pre-tax accounts converges RMD-driven income to ordinary rate, but matches the tax wrapper.
Charitable trust strategies
Pattern: CRT or DAF
Charitable remainder trusts and donor-advised funds provide alternative deduction paths for retirees with charitable intent and significant RMDs.
SEP/SIMPLE business retirement vehicles
Pattern: still working past 73
Continued employment past 73 in a small business with SEP or solo 401(k) can defer RMD on those accounts beyond 73.
What RMDs do
Required Minimum Distributions are mandatory annual withdrawals from traditional IRAs, 401(k)s, and similar pre-tax retirement accounts. RMDs begin at age 73 under SECURE 2.0 and follow IRS-specified percentage tables that grow with age. The first RMD is approximately 4 percent of balance; by age 90, RMDs are approximately 9 percent.
The math means RMDs grow significantly across retirement years. A retiree with $1 million in traditional IRA at age 73 takes roughly $40,000 in year one. By age 80, the RMD on a similar balance is approximately $52,000. By 90, $90,000+. Each RMD is taxable as ordinary income and contributes to MAGI for IRMAA purposes.
Pre-RMD conversion windows
The years between retirement (often early 60s) and RMD age 73 are typically the lowest-tax-rate years of retirement. Earned income has stopped; Social Security may not yet be claimed; portfolio withdrawals can be limited to the basic spending need. These years are ideal for Roth conversions that reduce the pre-tax balance and shrink future RMDs.
The optimization is to convert annually to fill the 12 percent or 22 percent bracket. Over 10–13 years of conversion, this can shift several hundred thousand dollars from pre-tax to Roth at low blended rates. The result is smaller RMDs in retirement, lower lifetime tax, and more flexibility on income management.
QCDs as the charitable shortcut
Qualified Charitable Distributions (available at age 70½+) allow up to $105,000 (2026 limit) of IRA distributions to be transferred directly to qualified charity. The QCD satisfies RMD requirements and is excluded from gross income. The tax effect is superior to deducting the donation as an itemized charitable contribution because the income is never included in AGI.
For retirees with charitable intent, QCDs are typically the optimal channel for the charitable giving. The IRMAA implications alone justify the structure for retirees near the IRMAA brackets.
The inherited IRA 10-year rule
SECURE Act eliminated the lifetime 'stretch IRA' for non-spouse beneficiaries. Inherited IRAs must now be fully distributed within 10 years of the original owner's death. The rule pushes substantial taxable distributions to beneficiaries, often in their highest-earning years.
The implication for the original holder is to consider Roth conversions during their own lifetime if heirs are in higher brackets. Roth IRA inherited under the same 10-year rule produces tax-free distributions to the beneficiaries, transferring more after-tax wealth than the equivalent traditional IRA.
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Common questions
Questions.
What's my first RMD age?
73 if you turn 73 in 2024 or later (post-SECURE 2.0). 75 if you turn 73 in 2033 or later. Earlier ages applied to older retirees.
Can I delay RMDs by working?
Sometimes, for the 401(k) at the employer where you currently work, if you don't own > 5%. Traditional IRAs require RMDs regardless of employment status.
What's the penalty for missing RMD?
25% of the under-distributed amount (reduced from 50% by SECURE 2.0). Reduced to 10% if corrected within 2 years.
Can I take more than the RMD?
Yes — RMD is the minimum, not the maximum. Larger distributions are allowed but not required.
Are Roth IRA RMDs required?
Not during the original owner's lifetime. Inherited Roth IRAs face the 10-year rule.
How is RMD calculated?
Account balance on December 31 of prior year divided by the IRS Uniform Lifetime Table factor for current age. Spouses 10+ years younger use joint table.
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