From the Retirement Planning hub — Evergreen Wealth Management — flat-fee retirement income, withdrawal, and Social Security planning for Massachusetts retirees.
Required minimum distributions (RMDs) are mandatory annual withdrawals the IRS requires from most retirement accounts starting at age 73. Under SECURE 2.0, this age rises to 75 beginning in 2033. If you have a traditional IRA, 401(k), or similar tax-deferred account, you cannot let that money grow untouched forever — the government wants its share of the taxes you deferred.
The good news: with the right planning, you can significantly reduce your future RMDs and keep more of your retirement savings working for you. Here is exactly how RMDs work, what they cost you, and what strategies can shrink them.
What Are Required Minimum Distributions?
When you contribute to a traditional IRA or 401(k), you get a tax deduction upfront. The IRS lets that money grow tax-deferred for decades, but they do not let it grow forever. RMDs are the mechanism that forces you to start withdrawing — and paying taxes on — that money.
RMDs apply to:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k), 403(b), and 457(b) plans
- Inherited IRAs (different rules apply)
RMDs do not apply to Roth IRAs during the original owner’s lifetime. This is one of the key reasons Roth conversions are such a powerful planning tool.
When Do RMDs Start?
Under SECURE 2.0, the RMD starting age depends on when you were born:
| Year of Birth | RMD Starting Age | First RMD Deadline |
|---|---|---|
| 1951–1959 | 73 | April 1 of year after turning 73 |
| 1960 or later | 75 (starting 2033) | April 1 of year after turning 75 |
There is an important catch with your first RMD. You can delay it until April 1 of the year after you turn 73, but if you do, you will owe two RMDs in that second year — the delayed first-year distribution plus the current-year distribution. For most people, that creates a larger tax bill than just taking the first RMD on time.
If you are still working and have money in your current employer’s 401(k), you may be able to delay RMDs from that specific plan until you actually retire. This is called the “still working” exception and does not apply to IRAs or old 401(k)s from previous employers.
How Are RMDs Calculated?
The calculation is straightforward: take your account balance as of December 31 of the prior year and divide it by a life expectancy factor from the IRS Uniform Lifetime Table.
For example, at age 73 the divisor is approximately 26.5. If your traditional IRA balance was $1,000,000 on December 31:
$1,000,000 ÷ 26.5 = $37,736 RMD
As you age, the divisor gets smaller, which means the percentage you must withdraw grows larger:
| Age | Approximate Divisor | Approximate % of Balance | RMD on $1M Balance |
|---|---|---|---|
| 73 | 26.5 | 3.8% | $37,736 |
| 75 | 24.6 | 4.1% | $40,650 |
| 80 | 20.2 | 5.0% | $49,505 |
| 85 | 16.0 | 6.3% | $62,500 |
| 90 | 12.2 | 8.2% | $81,967 |
If you have multiple traditional IRAs, you calculate the RMD for each one separately, but you can take the total from any one or combination of your IRAs. You cannot, however, satisfy a 401(k) RMD by withdrawing from an IRA, or vice versa.
What Happens If You Miss an RMD?
The penalty for missing an RMD used to be a brutal 50% excise tax. SECURE 2.0 reduced it to 25% of the amount you should have withdrawn. And if you correct the mistake within two years, the penalty drops further to just 10%.
Still, a 25% penalty on top of ordinary income tax is painful. On a $40,000 missed RMD, that is a $10,000 penalty before you even pay the income tax. Set a calendar reminder and do not rely on your custodian to notify you — it is your responsibility.
Why Do RMDs Matter So Much for Your Tax Bill?
RMDs are taxed as ordinary income. For a married couple already receiving Social Security and perhaps a pension, a $40,000–$80,000 RMD can easily push you into the 22% or 24% federal bracket — plus the 5% Massachusetts state tax.
But the tax bracket is only part of the damage. Larger RMDs can also:
- Trigger IRMAA surcharges on Medicare: A married couple with modified adjusted gross income over $218,000 pays an extra $81.20 per month per person for Part B alone. At the highest tier (over $750,000 MAGI), the surcharge reaches $487 per month per person. And because IRMAA is based on income from two years prior, a large RMD in 2026 affects your Medicare premiums in 2028.
- Make more of your Social Security taxable: Up to 85% of your Social Security benefits become taxable once combined income exceeds $44,000 for married couples. These thresholds have not been adjusted for inflation since 1993.
- Reduce or eliminate other deductions and credits: Several tax benefits phase out as income rises.
I explain more about these cascading effects in our guide to tax-efficient withdrawal strategies.
5 Strategies to Reduce Your RMDs
1. Roth Conversions Before Age 73
This is the single most effective RMD reduction strategy for most people. By converting traditional IRA money to a Roth IRA, you pay taxes now at known rates and permanently remove that money from future RMD calculations.
The sweet spot for Roth conversions is typically the years between retirement and age 73 — when your income is often lower. A couple with a $32,200 standard deduction (2026) could convert up to approximately $100,800 and stay in the 12% federal bracket, or up to $201,775 to stay in the 22% bracket.
For a detailed breakdown of this strategy, see our post on Roth IRA conversions in retirement.
2. Qualified Charitable Distributions (QCDs)
If you are age 70½ or older and make charitable donations, a QCD lets you send up to $108,000 per year (2026 limit, indexed for inflation) directly from your IRA to a qualified charity. The distribution satisfies your RMD but is completely excluded from taxable income.
Compare this to taking the RMD, paying taxes, and then donating from your checking account. Even if you itemize and take the charitable deduction, the QCD usually produces a better tax result because it reduces your adjusted gross income — which affects IRMAA, Social Security taxation, and other income-dependent thresholds.
3. Contribute to a Roth 401(k) While Still Working
If you are still working and have access to a Roth 401(k), directing your contributions there means that money will never be subject to RMDs. The 2026 employee deferral limit is $24,500, with an additional $8,000 catch-up for ages 50–59 and 64+, or $11,250 for ages 60–63.
Note: starting in 2026, if your prior-year FICA wages exceeded $150,000, catch-up contributions must go into the Roth option. This is a SECURE 2.0 change that affects many higher earners.
4. Use a Qualified Longevity Annuity Contract (QLAC)
A QLAC lets you use up to $200,000 of your traditional IRA or 401(k) to purchase a deferred annuity that starts paying out as late as age 85. The amount in the QLAC is excluded from your RMD calculation until payments begin. This strategy works best for people who want longevity insurance and RMD reduction in one move.
5. Do Not Over-Contribute to Tax-Deferred Accounts
This one is forward-looking. If you are still in the accumulation phase and expect to have substantial retirement savings, consider splitting contributions between pre-tax and Roth accounts. A mix of account types gives you much more flexibility in retirement to manage your tax bracket and RMDs.
How a Flat-Fee Advisor Helps With RMD Planning
RMD planning is one of those areas where the advisor fee model really matters. If your advisor charges a percentage of assets under management (AUM), every dollar you convert from a traditional IRA to a Roth IRA — or every dollar you send to charity via a QCD — still sits in your portfolio being charged a fee, or it leaves the portfolio and reduces the advisor’s revenue.
At Evergreen Wealth Management, we charge a flat monthly fee regardless of your portfolio size. That means our advice on Roth conversions, QCDs, and RMD strategies is never influenced by how those decisions affect our revenue. We do what is best for your tax situation, period.
A Real-World Example: The Cost of Doing Nothing
Consider a 63-year-old Massachusetts couple who just retired with $2,000,000 in traditional IRAs and $40,000 in annual Social Security benefits (combined). If they do nothing and wait until age 73 to start RMDs:
- Assuming 5% annual growth, their traditional IRA balance at 73 could reach approximately $3,260,000
- First-year RMD: roughly $123,000
- Combined with Social Security, their taxable income pushes well into the 24% federal bracket
- IRMAA surcharges kick in, costing an additional $3,400+ per year for the couple
- Up to 85% of their Social Security becomes taxable
Now compare that to a couple who does strategic Roth conversions of $100,000–$150,000 per year from ages 63 to 72. They pay taxes at the 22% bracket during those years, but by age 73 they might have only $1,500,000 in traditional IRAs. Their RMD drops to about $56,600 — roughly half — keeping them in a lower bracket and below IRMAA thresholds.
Over a 20-year retirement, the tax savings from this approach can exceed $200,000. That is real money. We walk through similar scenarios in our post about how one couple earned six figures while paying zero federal income tax.
Frequently Asked Questions
Do Roth IRAs Have Required Minimum Distributions?
No. Roth IRAs are not subject to RMDs during the original owner’s lifetime. This is one of the biggest advantages of Roth accounts and a key reason why Roth conversions before age 73 can be so valuable. Inherited Roth IRAs, however, do have distribution requirements for non-spouse beneficiaries under the 10-year rule.
Can I Reinvest My RMD After I Take It?
Yes, but not back into a tax-deferred account. Once you take your RMD and pay taxes on it, you can invest the after-tax amount in a taxable brokerage account. You will owe taxes on any future gains, but at potentially lower capital gains rates rather than ordinary income rates.
How Does Evergreen Wealth Management Help With RMD Planning?
As a fee-only fiduciary in Boston, Massachusetts, Nick Stevens, CFP® and the Evergreen Wealth Management team build multi-year tax projections that map out the optimal Roth conversion and withdrawal strategy for each client. Because we charge a flat monthly fee rather than a percentage of assets, our RMD recommendations are never influenced by how they affect our compensation. We help clients coordinate RMDs with Social Security timing, Medicare IRMAA brackets, and charitable giving to minimize lifetime taxes.
What Is the Deadline for Taking My RMD Each Year?
December 31 of each year, with one exception: your very first RMD can be delayed until April 1 of the following year. However, delaying means you will have two taxable distributions in that second year, so most people are better off taking the first RMD by December 31 of the year they turn 73.
Start Planning Before RMDs Force Your Hand
The best RMD strategy starts years before your first distribution is due. If you are in your late 50s or 60s with significant tax-deferred savings, now is the time to model out Roth conversions, evaluate your charitable giving approach, and build a withdrawal strategy that keeps your lifetime tax bill as low as possible.
At Evergreen Wealth Management, we help clients in Boston and across Massachusetts build these multi-year plans. If you would like to see what a proactive RMD strategy could save you, learn how to get started.
Nick Stevens, CFP® is the founder of Evergreen Wealth Management in Boston, a flat-fee financial planning and investment management firm. Evergreen charges a fixed monthly fee regardless of portfolio size. Learn more about how we work or get in touch.