At some point in retirement, many individuals are required to begin withdrawing money from certain accounts. These Required Minimum Distributions can increase taxable income, affect Social Security taxation, and reduce planning flexibility — but with the right strategy, their impact can be managed.
What RMDs Are and When They Begin
Required Minimum Distributions are mandatory annual withdrawals from traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred retirement accounts. Under SECURE Act 2.0 (effective 2023), RMDs begin at age 73 for most people.
The amount you must withdraw each year is calculated by dividing your account balance (as of December 31 of the prior year) by a life expectancy factor from the IRS Uniform Lifetime Table. As you age, the factor decreases — meaning the percentage you must withdraw increases each year.
Why RMDs Matter More Than Most People Expect
RMDs can:
Increase taxable income: RMD amounts are added to your ordinary income, potentially pushing you into a higher bracket or triggering IRMAA surcharges.
Affect Social Security taxation: Higher income from RMDs can increase the percentage of Social Security benefits that are taxable.
Reduce planning flexibility: Once RMDs begin, you have less control over the timing and amount of income from your traditional accounts — which limits your ability to manage your tax bracket proactively.
Strategies to Manage RMD Impact
Roth conversions before age 73: Converting traditional IRA funds to a Roth IRA before RMDs begin reduces the balance subject to RMDs — and future Roth withdrawals are tax-free.
Qualified Charitable Distributions (QCDs): If you're 70½ or older, you can donate up to $105,000 directly from your IRA to a qualified charity. The QCD satisfies your RMD without the amount being included in your taxable income.
Aggregation rules: If you have multiple traditional IRAs, you can aggregate the RMDs and take the total from any one account — giving you flexibility in which assets you liquidate.