If you’ve spent decades saving in a traditional IRA or 401(k), here’s something that might catch you off guard. The government doesn’t let you keep that money growing tax-deferred forever. At some point, you’re required to start withdrawing money, whether you need it or not.
These mandatory withdrawals are called required minimum distributions, or RMDs. For many retirees, RMDs are manageable. For others, especially those who’ve been disciplined savers, the distributions can be surprisingly large. That’s when the tax bill starts to sting.
The good news? You don’t have to wait until RMDs kick in to start planning. The earlier you act, the more control you’ll have over your taxes in retirement.
When RMDs begin and why it matters
Under current rules, you must start taking RMDs at age 73 if you were born between 1951 and 1959. Thanks to the SECURE 2.0 Act, the age bumps up to 75 for anyone born in 1960 or later, starting in 2033. For people born in 1950, the RMD starting age is 72.
Your first RMD is due by April 1 of the year after you reach the applicable age. After that, each annual RMD is due by December 31. Miss that deadline and the IRS penalty is steep: 25% of the amount you should have withdrawn. That penalty drops to 10% if the shortfall is timely corrected within two years, though that’s still a hefty price to pay for an oversight.
Here’s the real issue for successful savers. The RMD formula divides your account balance by an IRS life expectancy factor. The larger your balance, the larger the distribution. If you’ve accumulated $2 million or more in tax-deferred accounts, your annual RMDs could easily push $80,000 to $100,000 or higher. That income gets added on top of Social Security, pensions, and any other earnings you have. The result can be a significantly higher tax bracket than you expected.
The ripple effects of large RMDs
A large RMD doesn’t just increase your federal income tax. It can set off a chain reaction that affects several areas of your financial life.
For starters, higher income can mean Medicare surcharges through what’s known as IRMAA. IRMAA stands for Income-Related Monthly Adjustment Amount, and it’s a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds.
In 2026, IRMAA surcharges begin when modified adjusted gross income exceeds $109,000 for individuals and $218,000 for married couples filing jointly, based on income reported two years prior. Since IRMAA is based on the modified adjusted gross income shown on your tax return from two years prior, a large RMD in 2024 could mean higher Medicare premiums in 2026.
Higher income from RMDs can also cause more of your Social Security benefits to become taxable. Up to 85% of your Social Security benefits can be subject to federal income tax once your provisional income, which includes adjusted gross income, nontaxable interest, and half of your Social Security benefits, exceeds certain thresholds. Large RMDs are often the culprit that pushes retirees over that line.
Strategy one: Roth conversions before RMDs start
One of the most powerful tools for managing future RMDs is the Roth conversion. This involves converting money from a traditional IRA to a Roth IRA, or converting eligible pretax retirement-plan dollars to Roth either through an in-plan Roth conversion (if your plan allows it) or after a rollover to an IRA. You’ll pay income tax on the amount you convert in the year you do it. In return, that money grows tax-free and is never subject to RMDs during your lifetime.
The sweet spot for Roth conversions is often the “gap years” between retirement and the start of RMDs. During this window, your income may be lower than it was during your working years and lower than it will be once RMDs begin. That makes it an ideal time to convert portions of your traditional accounts into Roth accounts while staying in a manageable tax bracket.
The key is to convert strategically. You don’t have to move everything at once. Many retirees benefit from a laddered approach, converting a set amount each year that fills up their current tax bracket without spilling into the next one. Over time, this can meaningfully reduce the balance in your tax-deferred accounts and shrink your future RMDs.
Keep in mind that Roth conversions can’t be undone. They also increase your taxable income in the year of the conversion, which could trigger IRMAA surcharges or affect your Social Security taxation. That’s why running a year-by-year tax projection before converting is essential.
Strategy two: qualified charitable distributions
If you’re charitably inclined and at least 70½ years old, qualified charitable distributions (QCDs) offer a way to satisfy your RMDs while supporting causes you care about. A QCD allows each eligible individual to transfer up to $111,000 per year in 2026 directly from an IRA to a qualified charity. The distribution counts toward your RMD, but it doesn’t show up as taxable income on your return.
This is especially valuable for retirees who don’t need their full RMD for living expenses. Instead of taking the distribution, paying the tax, and then writing a check to charity, a QCD skips the taxable step entirely. That means lower adjusted gross income, which can help you avoid IRMAA surcharges and keep more of your Social Security benefits tax-free.
One important timing note: the first dollars you withdraw from your IRA in any given year are applied to your RMD. If you take a regular distribution first and then try to make a QCD later, the QCD won’t erase the taxable income from that earlier withdrawal. The order matters, so plan your QCDs before taking any other distributions for the year.
Strategy three: tax-bracket management
Even if you’re not ready for Roth conversions or QCDs, there’s still a straightforward strategy worth considering: taking voluntary withdrawals from your tax-deferred accounts before RMDs begin.
Once you reach age 59½, you can withdraw from your IRA or 401(k) without the 10% early withdrawal penalty. If you’re in a lower tax bracket during those early retirement years, it can make sense to pull money out voluntarily and pay tax at your current, lower rate. This reduces the balance that will later be subject to RMDs, potentially keeping you in a lower bracket when those mandatory withdrawals begin.
Think of it as tax-bracket optimization. You’re choosing to pay some tax now at a rate you can control rather than being forced to pay at a higher rate later. The goal isn’t to drain your accounts early. It’s to smooth out your taxable income over time so a massive tax bill never blindsides you.
Other considerations
If you delay Social Security benefits, you give yourself more room to do Roth conversions or strategic withdrawals in the years before RMDs start. The less income you have during those gap years, the more you can move from traditional accounts to Roth accounts without jumping into a higher bracket.
You should also know about qualifying longevity annuity contracts, or QLACs. A QLAC is a type of Deferred Income Annuity you can purchase with funds from your IRA or 401(k), up to $210,000 for 2026.
The money you put into a QLAC is excluded from your account balance when calculating RMDs until the annuity income start date you choose, which can be no later than age 85. It’s not the right fit for everyone, but for those with large balances and longevity concerns, it’s worth exploring.
The bottom line
Large RMDs don’t have to be a surprise. If you start planning in your 50s or 60s, you have years to reduce the impact through Roth conversions, strategic withdrawals, and charitable giving strategies. The window between retirement and RMDs is one of the most valuable tax planning opportunities you’ll ever have. Don’t let it pass without a plan.
Every situation is different, and the right approach depends on your income, your tax bracket, your charitable goals, and how much you’ve accumulated. Working with a financial advisor who understands the interplay between RMDs, taxes, and Medicare can help you build a withdrawal strategy that protects more of what you’ve saved.
