Retirement should bring peace of mind.

It shouldn’t bring an unexpected tax surprise.

Many retirees spend years building their retirement savings, but fewer understand what happens when the IRS requires them to start taking money out. These mandatory withdrawals are called Required Minimum Distributions (RMDs), and failing to plan for them can lead to unnecessary taxes and costly penalties.

Under current law, most taxpayers must begin taking Required Minimum Distributions (RMDs) from traditional retirement accounts once they reach age 75 (for individuals who reach age 74 after December 31, 2032). Understanding when RMDs begin—and planning for their tax impact—can help preserve more of your retirement savings.

In this week’s Tax Tip Tuesday, we’ll explain how Required Minimum Distributions work, which retirement accounts are affected, and strategies that may help reduce the tax impact over time.

What Are Required Minimum Distributions (RMDs)?

Required Minimum Distributions (RMDs) are the minimum amounts the IRS requires you to withdraw each year from certain retirement accounts after reaching the applicable starting age.

The purpose is straightforward.

Many retirement accounts receive years of tax-deferred growth.

Eventually, the IRS expects taxes to be paid on those funds.

For many retirees, RMDs become part of their annual retirement income planning.

Which Retirement Accounts Require RMDs?

Required Minimum Distributions generally apply to:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• Most 401(k) plans
• 403(b) plans
• Governmental 457(b) plans

Roth IRAs owned by the original account holder generally do not require lifetime RMDs, making them an attractive planning option for many retirees.

For official guidance, review IRS Retirement Plan and IRA Required Minimum Distributions FAQs and IRS Publication 590-B.

When Do Required Minimum Distributions Begin?

For most taxpayers under current law, Required Minimum Distributions begin when you reach age 75.

Your first RMD generally must be taken by April 1 of the year following the year you reach your required beginning age.

After that, annual RMDs are generally due by December 31 each year.

Delaying the first distribution until April may sound appealing, but it can also result in taking two taxable distributions in the same year, potentially increasing your taxable income.

Planning ahead can help avoid that situation.

How Are RMDs Calculated?

The amount you must withdraw depends on several factors, including:

• Your retirement account balance
• Your age
• IRS life expectancy tables

Because the calculation changes each year, your Required Minimum Distribution may also change annually.

Many financial institutions calculate the minimum withdrawal for account holders, but the responsibility for taking the correct amount ultimately belongs to the taxpayer.

Why Required Minimum Distributions Matter

RMDs don’t just affect retirement income.

They can also affect your taxes.

Larger withdrawals may:

• Increase your taxable income
• Push you into a higher tax bracket
• Increase the taxation of Social Security benefits
• Affect Medicare premium surcharges (IRMAA)
• Reduce eligibility for certain tax benefits

Understanding these interactions allows retirees to make more informed financial decisions.

Strategies to Help Reduce the Tax Impact of RMDs

While RMDs generally cannot be avoided once they begin, planning years in advance may reduce their tax impact.

Potential strategies include:

• Gradually converting eligible Traditional IRA assets to a Roth IRA
• Taking voluntary withdrawals before RMD age
• Coordinating retirement withdrawals across multiple accounts
• Timing income strategically
• Reviewing charitable giving opportunities such as Qualified Charitable Distributions (QCDs), if eligible

Every taxpayer’s situation is different.

A retirement distribution strategy should be based on your income, tax bracket, and long-term financial goals.

How RMDs Fit Into Your Retirement Tax Strategy

Required Minimum Distributions are just one piece of retirement tax planning.

Taxpayers approaching retirement should also review our articles on Traditional IRA Tax Benefits, Roth IRA Tax Benefits, Understand Your Tax Bracket, Saver’s Credit, and Contribute to a Health Savings Account (HSA).

Planning before retirement often creates more options than reacting after distributions begin.

Common RMD Mistakes

Many retirees unintentionally make costly mistakes.

Common examples include:

• Forgetting to take the required withdrawal
• Taking less than the required minimum
• Waiting until year-end without tax planning
• Assuming Roth IRAs require lifetime RMDs
• Not coordinating withdrawals with other taxable income

Fortunately, these mistakes are often avoidable with proper planning.

Key Takeaways

Required Minimum Distributions are an important part of retirement tax planning.

Understanding when they begin, how they’re calculated, and how they affect your taxes can help you avoid unnecessary surprises.

The earlier you begin planning, the more flexibility you may have.

Retirement should be about enjoying the years you’ve worked for—not scrambling to understand tax rules after they take effect.

Need Help Planning for Required Minimum Distributions?

Every retirement plan is unique.

The best distribution strategy depends on your retirement accounts, expected income, tax bracket, and long-term financial goals.

At Cheshier Tax Resolution, we help taxpayers understand how Required Minimum Distributions fit into their overall tax strategy so they can make informed financial decisions with confidence.

A little planning today can help preserve more of your retirement income tomorrow.

Frequently Asked Questions

What are Required Minimum Distributions (RMDs)?

Required Minimum Distributions are the minimum annual withdrawals the IRS requires from most tax-deferred retirement accounts after reaching the applicable starting age.

At what age do RMDs begin?

Under current law, most taxpayers begin taking RMDs at age 75, depending on their birth year.

Which retirement accounts require RMDs?

Traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer-sponsored retirement plans require RMDs. Original Roth IRA owners generally do not.

What happens if I don’t take my RMD?

The IRS may assess an excise tax on the amount that should have been withdrawn, although relief may be available in certain circumstances.

Can I withdraw more than my Required Minimum Distribution?

Yes. However, additional withdrawals generally do not count toward future years’ RMD requirements.

Can a Roth IRA help reduce future RMDs?

Potentially. Original Roth IRA owners generally are not subject to lifetime RMDs, making Roth conversions an important planning discussion for some taxpayers.

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