Walter turned 73 in October of 2024. He knew he had to take a required minimum distribution from his traditional IRA. He also knew he had until April 1 of the following year to take his first one. So he waited.
What Walter didn't fully appreciate was that by pushing his first RMD into 2025, he'd also owe his second RMD by December 31 of that same year. Two distributions. One tax return. His combined RMDs totaled just over $41,000, which — stacked on top of his pension and Social Security — pushed him into the 22% bracket and triggered a Medicare surcharge he wasn't expecting.
I've seen this happen more times than I'd like to admit. The rules around required minimum distributions aren't complicated, exactly, but they have teeth. And the first year is where most people get bitten.
What an RMD Is and Why the IRS Cares
Here's the basic deal. You spent decades putting money into tax-deferred retirement accounts — traditional IRAs, 401(k)s, 403(b)s, SEPs, SIMPLE IRAs. The IRS gave you a tax break on those contributions. But the government didn't forget about that money. A required minimum distribution is the IRS saying: Time to start withdrawing, and time to start paying taxes on it.
Under the SECURE 2.0 Act, you must begin taking RMDs the year you turn 73. That threshold moves to 75 starting in 2033, but if you're reading this article, 73 is probably your number. The requirement applies to every tax-deferred account I just mentioned — traditional IRAs, employer plans, the works.
Two notable exceptions. Roth IRAs are not subject to RMDs during your lifetime. You can let that money grow tax-free until you're 105 if you want. And as of 2024, Roth 401(k)s are also exempt — a change from SECURE 2.0 that eliminated a rule that never made much sense in the first place.
What happens if you miss a required minimum distribution? The penalty used to be 50% of the amount you should have withdrawn. Congress reduced that to 25% under SECURE 2.0, and if you correct the mistake within two years, it drops to 10%. That's progress, but 10% of a $20,000 RMD is still $2,000 you didn't need to lose.
How to Calculate Your RMD
The formula is straightforward. Take your total account balance as of December 31 of the prior year and divide it by a factor from the IRS Uniform Lifetime Table. That table is published in IRS Publication 590-B, and your custodian — Fidelity, Schwab, Vanguard, whoever holds your accounts — will usually calculate it for you.
At age 73, your divisor is 26.5. So if your traditional IRA held $500,000 on December 31 of last year, your required minimum distribution would be $500,000 / 26.5 = $18,868.
Here's what catches people off guard. That divisor shrinks every year. At 75, it's 24.6. At 80, it's 20.2. At 85, it's 16.0. Which means your RMD grows as a percentage of your balance every single year — even if the balance stays flat or declines. By your mid-80s, you're required to withdraw roughly 5-6% annually whether you need the money or not.
One exception to the standard table: if your sole beneficiary is a spouse who is more than 10 years younger, you can use the Joint Life and Last Survivor Expectancy Table instead. The divisors are larger, so your required minimum distribution is smaller. I've had a few clients over the years where this applied, and the tax savings were meaningful — sometimes several thousand dollars a year.
The First-Year Deadline Trap
This is where Walter's story comes in, and it's the single most important timing decision you'll make with your required minimum distributions.
Your first RMD is due by April 1 of the year after you turn 73. Every subsequent RMD is due by December 31 of each year. That April 1 grace period sounds generous. It isn't. It's a trap for anyone who doesn't think two steps ahead.
Let me walk through the math. Say you turn 73 in 2026. Your first RMD is technically due by April 1, 2027. But your second RMD — for 2027 — is due by December 31, 2027. If you delay that first distribution, you're taking two RMDs in one calendar year: roughly $18,868 plus $19,216 (because the divisor dropped), for a combined $38,084 in taxable income from RMDs alone.
For most people, that's a bad outcome. Two required minimum distributions stacked on your Social Security, pension, and any other income can push you into a higher tax bracket, increase the taxable portion of your Social Security benefits, and trigger Medicare premium surcharges.
My advice to nearly every client: take your first RMD in the year you turn 73. Don't wait for the April 1 deadline. The only scenario where delaying makes sense is if you retired mid-year with unusually high income from your final working months and expect significantly lower income the following year. That's a narrow window, and it requires running the numbers with a tax professional — not guessing.
How RMDs Affect Your Taxes
A required minimum distribution is taxed as ordinary income. It gets added on top of everything else — your pension, Social Security, part-time work, investment income. The total determines your tax bracket, and RMDs can push you over a line you didn't see coming.
Let me be direct about Social Security. If your combined income (adjusted gross income + nontaxable interest + half your Social Security) exceeds $44,000 for married filing jointly, up to 85% of your Social Security becomes taxable. RMDs count toward that calculation. I've watched clients go from having 50% of their Social Security taxed to 85% because of a required minimum distribution they hadn't planned around.
Then there's IRMAA — the Income-Related Monthly Adjustment Amount. Medicare uses your income from two years prior to set premium surcharges. For 2026, if your modified AGI as a married couple exceeded roughly $212,000 in 2024, you're paying higher Part B and Part D premiums. A large RMD (or two in one year, like Walter) can trigger these surcharges, and they don't kick in until two years later, when most people have forgotten what caused them.
State taxes add another layer. If you live in Florida, Texas, Nevada, or one of the other states with no income tax, your RMD escapes state taxation entirely. If you're in Connecticut (as many of my clients are), you're looking at state income tax on top of the federal bill. This is one reason I've seen clients time relocations around their RMD start date — not the only reason, but a real one.
Common Mistakes I See Every Year
After 35 years of working with retirees, I keep a mental list. Here are the mistakes that come up most often with required minimum distributions.
Confusing IRA aggregation rules with 401(k) rules. If you have three traditional IRAs, you calculate the RMD for each one separately, but you can take the total from any one of them. That's the aggregation rule, and it's convenient. But it does not apply to 401(k)s. If you have two old 401(k)s, each one's RMD must come from that specific account. I've seen people pull their entire RMD from one IRA while forgetting about a dormant 401(k) from a job they left 15 years ago.
Inherited IRAs. These have their own rules entirely. If you inherited an IRA from a non-spouse who passed away after 2019, you're subject to the 10-year rule — the account must be fully distributed within 10 years. Recent IRS guidance also requires annual distributions during those 10 years if the original owner had already started RMDs. This gets technical, but bear with me: the penalties for getting inherited IRA distributions wrong can stack up fast.
Tax withholding. Your custodian will ask whether you want federal taxes withheld from your RMD. Many people default to 10%, which often isn't enough. If your RMD pushes you into the 22% or 24% bracket, you'll owe the difference at tax time — potentially with an underpayment penalty on top. Adjust your withholding or make quarterly estimated payments.
Waiting until the last week of December. Custodians get overwhelmed in late December. If you submit your distribution request on December 29, there's a real chance it doesn't process by December 31. I tell every client: set a calendar reminder for December 1 and take care of it early.
Assuming Roth IRAs have RMDs. They don't. Not during your lifetime. I mention this because I get asked about it at least twice a month at the senior center.
Strategies to Reduce the Tax Bite
You can't avoid required minimum distributions (unless you convert everything to Roth accounts before 73, which has its own tax consequences). But you can manage the impact.
Qualified Charitable Distributions. If you're 70 1/2 or older and charitably inclined, a QCD lets you send up to $105,000 per person directly from your IRA to a qualified charity in 2026. The distribution satisfies your RMD but is excluded from your adjusted gross income. You don't get a charitable deduction — you get something better: the income never shows up on your return at all. For clients who donate to their church, alma mater, or local nonprofits, this is the single most tax-efficient move available. Consider incorporating QCDs into your overall estate planning strategy.
Roth conversions before you turn 73. If you're in the gap years between retirement and your first required minimum distribution, consider converting a portion of your traditional IRA to a Roth each year. You'll pay income tax on the conversion, but you reduce the balance subject to future RMDs and move money into an account with no lifetime distribution requirements. I wrote about this in detail in my article on Roth conversions — the strategy is particularly powerful during low-income years. (Yes, even I was surprised by how much it saved Gerald.)
The still-working exception. If you're still employed past 73, you can delay RMDs from your current employer's 401(k) — not your IRAs, and not old 401(k)s from previous employers. You must own less than 5% of the company. This exception is narrower than people think, but for those who qualify, it's genuinely useful.
Withhold taxes directly from your RMD. This is more of a compliance strategy than a savings strategy, but it simplifies your life. Federal withholding taken from an IRA distribution is treated as paid evenly throughout the year, even if you take the distribution in December. That means you can avoid estimated tax payments entirely by withholding enough from your RMD — a trick that saves a surprising number of clients from underpayment penalties.
Asset location. This is a long-term play. Keep bonds and other income-generating investments in your traditional IRA (where withdrawals are already taxed as ordinary income) and hold equities in your Roth (where growth compounds tax-free). It doesn't reduce your required minimum distribution, but it makes the overall tax picture more favorable over time.
What to Do Now
If your 73rd birthday is approaching — or if you've already passed it and haven't organized this yet — here's a practical checklist.
- Identify every account subject to RMDs. Traditional IRAs, old 401(k)s, 403(b)s, SEP IRAs, SIMPLE IRAs. Check with former employers if you're not sure.
- Gather December 31 balances. Your custodian will report these, but it helps to have them in one place.
- Calculate your RMD using the Uniform Lifetime Table (or ask your custodian — most will do it for you).
- Decide on timing. Take your first required minimum distribution in the year you turn 73 unless a tax professional runs the numbers and confirms that delaying makes sense.
- Consider a QCD if you're already giving to charity. It's the most overlooked tax strategy for retirees.
- Set up automatic distributions if your custodian offers it. One less thing to remember.
- Coordinate with your CPA on withholding and estimated payments. Don't default to 10% and hope for the best.
- Review your beneficiary designations. This isn't directly about RMDs, but every time you touch your retirement accounts is a good time to confirm your beneficiaries are current — especially after a spouse's death, divorce, or family change.
- Put a recurring reminder on your calendar for December 1 each year. Give yourself a full month of cushion before the deadline.
One More Thing
Required minimum distributions aren't punishment. They're the other side of a deal you made decades ago when you got a tax deduction on every dollar you contributed. The IRS held up its end; now it's your turn.
But the rules have real consequences when you get them wrong — higher tax brackets, Medicare surcharges, penalties that eat into savings you worked 40 years to build. Walter learned that the hard way with his two-distribution year. You don't have to.
You don't need to become a tax expert. But you do need a plan, and you need it before your first RMD deadline — not after. Talk to a fee-only financial planner or a CPA who works with retirees. Bring this article if it helps. And whatever you do, don't wait until December 29.
