Understanding RMDs: A Calm Guide to What’s Coming (and How to Plan for It)
If you’re like most people, Required Minimum Distributions (RMDs) don’t feel urgent… until they suddenly are. And when they arrive, they can feel confusing and a little unfair: “Why am I being forced to take money out when I don’t even need it?”
That reaction is normal. RMDs are one of those retirement rules that can quietly shape your tax picture, your Medicare costs, and your flexibility—without you realizing it.
This is a simple guide to what RMDs are, when they start, why they matter, and what you can do well before the first one shows up.
What is an RMD?
An RMD is the minimum amount the IRS requires you to withdraw each year from certain retirement accounts once you reach a specific age. The idea is straightforward: you received a tax benefit when you contributed to these accounts, and the government eventually wants those dollars to become taxable income.
RMDs usually apply to:
Traditional IRAs (including rollover IRAs)
SEP and SIMPLE IRAs
Most employer retirement plans (401(k), 403(b), 457 plans)
RMDs generally do not apply to:
Roth IRAs (for the original account owner)
When do RMDs start?
RMD rules have shifted in recent years, and the starting age depends on your birth year. That’s why the best approach isn’t memorizing a number—it’s planning for the reality behind it:
By the time RMDs begin, your tax-deferred accounts may be at their largest. And if you’ve done a good job saving, the required withdrawals can be bigger than you expected.
If you’re within about 10 years of your RMD age, it’s worth taking a look now—when you still have options.
How are RMDs calculated?
RMDs are calculated using:
Your account balance as of December 31 of the previous year, and
An IRS life expectancy factor from published tables
The formula is simple:
RMD = Prior year-end balance ÷ IRS factor
As you get older, the factor gets smaller, which means the required withdrawals generally get larger over time.
Why RMDs matter more than most people expect
RMDs aren’t just a retirement “admin” rule. They can ripple into other parts of your life—especially if you value simplicity and control.
1) They can increase your taxes
Even if your spending doesn’t change, your taxable income can rise because the withdrawal is mandatory. Combine that with Social Security, pensions, rental income, or portfolio income, and your tax bracket can shift faster than you’d think.
2) They can increase Medicare premiums (IRMAA)
Medicare Part B and Part D premiums are income-tested. Higher income from RMDs can increase those premiums—sometimes by a meaningful amount—especially if you cross certain thresholds.
3) They can reduce flexibility later in retirement
Many people have a “lower income window” early in retirement—after they stop working but before Social Security and RMDs begin. If that window isn’t used intentionally, taxes later on can become less flexible and harder to manage.
4) They can complicate charitable giving
For families who are already giving to charity, RMDs can be an opportunity to give more efficiently—but it often requires the right structure (and the right timing).
Common RMD surprises (and why they happen)
Here are a few situations that catch good people off guard:
“We don’t need the money, but we have to take it.”
Yes—and that’s what creates the planning need.“Our taxes jumped, and we didn’t see it coming.”
RMDs stack on top of other income sources, and that stacking effect is what changes the picture.“We thought we were being conservative.”
Many retirees hold large tax-deferred balances because it felt like the “smart” or “safe” default for decades. That’s understandable. The rulebook changes as you move from saving to spending.
Planning moves that can help (before RMDs begin)
Not every strategy fits every household. But if you’re trying to reduce future stress and create more control, these are the levers that often matter most.
Use the “gap years” intentionally
If there’s a period between retirement and the start of Social Security/RMDs, you may have more flexibility than you’ll ever have again. Sometimes that means:
Filling lower tax brackets on purpose
Coordinating withdrawals in a way that smooths taxes over time
Consider Roth conversions as a control tool
A Roth conversion isn’t about avoiding taxes altogether—it’s about choosing when you pay them, and potentially reducing forced taxable income later.
We believe the goal of tax planning isn’t predicting the future. It’s building flexibility so the future doesn’t corner you.
For charitable families: consider QCDs
A Qualified Charitable Distribution (QCD) can allow eligible retirees to direct part of their RMD to charity in a tax-efficient way. For the right family, it’s one of the cleanest planning tools available.
Coordinate accounts and withdrawals
Which account you withdraw from, and in what order, can affect taxes over time. “Just take it from somewhere” often works—but it’s rarely optimal.
The point isn’t to outsmart the system—it’s to reduce stress
RMDs are a rule. You don’t need to fear them. But you also don’t want to be surprised by them—especially when you’ve worked so hard to build your financial life intentionally.
A little planning now can make later years feel calmer, cleaner, and more in your control.
If you’re approaching RMD age—or if you simply have a large balance in tax-deferred accounts—we can model what your future RMDs may look like and show you the key pressure points: taxes, Medicare premiums, and where you still have flexibility. Even a simple “here’s what’s coming” projection can bring a lot of clarity.
Disclaimer: This article is for educational purposes only and should not be considered tax or legal advice. Tax laws are complex and subject to change. Please consult your CPA or tax advisor before implementing any strategy.
