At Tapparo Capital Management, I spend my days helping clients create retirement plans that reflect their goals and the years of hard work they’ve put in. As you near your 70s, one thing becomes especially important: required minimum distributions, or RMDs.
I understand that having to take mandatory withdrawals can feel confusing or even a little stressful. But the good news is, with some careful planning, RMDs don’t have to be a burden. In fact, they can be an effective way to manage your retirement income and taxes.
In this article, we’ll walk through the RMD rules together, figure out what makes sense for your situation, and help you feel confident that your retirement can be just as fulfilling as you’ve imagined, without the guesswork or worry.
What Are Required Minimum Distributions?
Let’s start with a simple definition.
The IRS defines required minimum distributions as the minimal amount you must begin taking out of your retirement funds after you turn 73. (Note: Under the SECURE 2.0 Act, that RMD age will rise to 75 in 2033.)
- IRAs
- 401(k)s
- 457 plans
- 403(b)s
- SEP IRAs
- SIMPLE plans
Since Roth IRAs are funded with after-tax money, they are the only account type exempt from RMDs. You must, however, withdraw funds from other types of Roth account types, like Roth 401(k)s.
How Much Do I Have to Withdraw?
Both your average life expectancy (as calculated by the IRS) and the total money in your account on December 31st of the previous year determine how much you’re required to withdraw. Calculating your RMD is more straightforward than many people think, though I always recommend working with a professional to ensure accuracy.
6 Things You Need to Know About RMDs
This article isn’t intended as an all-encompassing discussion of RMDs, but there are five core rules you need to know:
1. RMDs Must Be Taken by December 31st of Every Year
To avoid a penalty, you are required to take your annual RMD before December 31st of each year. If you miss this deadline, you have to pay a substantial 50% tax on the money you should have taken out.
2. You Must Take Your First RMD by April 1
Even though annual RMDs are due on December 31st, you can postpone your first RMD until April 1st of the next year. For example, if you turned 73 in 2024, you could postpone your first distribution until April 1, 2025.
However, waiting this long could potentially push you into a higher tax bracket. That’s because you would be taking two distributions in the same tax year. So calculate exactly when it makes sense for you to take your first RMD.
3. You Could Defer RMDs if You’re Still Employed
The “still working” rule for 401(k)s exempts 73-year-olds who are not yet retired from taking RMDs.
Of course, there are exceptions:
- Only RMDs for your current employer-sponsored plan can be postponed.
- You must take withdrawals from any 401(k)s or IRAs you may have from prior workplaces.
4. You Can Reduce Your Taxes By Redirecting Your RMD to Charity
If you’re 70½ or older and charitably inclined, you can direct up to $108,000 per year from your IRA to a qualified charity via a QCD. This amount counts toward your RMD but is excluded from your taxable income.
Remember, though, that not every retirement account is eligible to use its funds as a QCD. The retirement account has to be an IRA that is a traditional, rollover, inherited, inactive SEP, or inactive SIMPLE plan.
A SEP or SIMPLE is deemed dormant if no employer contribution has been made during the plan year that ends during the tax year in which the charitable contribution is made.
5. Know how RMDs Interact With Social Security Taxation and Medicare Premiums
Here’s something that catches many retirees off guard: your RMDs can affect both your Social Security taxes and your Medicare costs.
For Social Security, the IRS uses something called “provisional income” to determine if your benefits are taxable. This includes your RMDs plus half of your Social Security benefits plus other income. If this total exceeds certain thresholds ($34,000 for singles, $44,000 for married couples), up to 85% of your Social Security benefits could become taxable. At lower thresholds ($25,000 for singles, $32,000 for married couples), up to 50% of benefits become taxable.
Medicare premiums present another consideration. If your modified adjusted gross income (which includes RMDs) exceeds certain levels, you’ll pay Income-Related Monthly Adjustment Amounts (IRMAA) surcharges, on your Medicare Part B and Part D premiums. These thresholds start at $106,000 for singles and $212,000 for married couples in 2025.
The good news is that both of these impacts can be managed with careful planning. Sometimes, spreading income over multiple years or using strategies like qualified charitable distributions can help keep you below these thresholds. Proactive Roth conversions are another useful tool to help keep IRMAA surcharges in check.
6. How QLACs Can Help You Postpone RMDs
A Qualified Longevity Annuity Contract (QLAC) is a special type of deferred income annuity designed for retirees who want greater control over their RMDs. With a QLAC, you can use up to $200,000 of your IRA or qualified retirement plan to purchase a guaranteed income stream that begins later in retirement—potentially as late as age 85.
The amount used to fund the QLAC is excluded from your RMD calculations until payouts begin, allowing you to postpone RMDs, reduce your taxable income, and better manage cash flow in your 70s and early 80s. While this strategy isn’t right for everyone, especially those who need liquidity or anticipate higher expenses earlier in retirement, a QLAC can be an effective way to balance longevity risk and tax efficiency.
Avoid RMD Confusion and Keep Your Retirement on Track
Many retirees have questions about required minimum distributions, and it’s easy to feel unsure about how they work. The good news is that with the right guidance, RMDs can become a tool to help you manage your retirement income effectively.
At Tapparo Capital Management, we’re here to provide clear, practical advice on RMDs and help you make informed decisions that shield your savings and support your long-term goals.
To schedule a “Get Acquainted Call” to see if we are a good fit for each other, call 978-887-1121 or email andrew@tapparocapital.com.
About Andy
Andrew Tapparo is a fee-only financial advisor at Tapparo Capital Management, a financial planning firm in Topsfield, MA, helping clients turn their savings into a retirement income that lasts. Inspired by the quote “Choose a job you love, and you will never work a day in your life,” Andy founded Tapparo Capital Management in 1997 with a passion for helping clients enjoy a truly worry-free and fulfilling retirement and experience financial freedom. As a Retirement Income Certified Professional (RICP®), he designs retirement strategies along with sound money management to help clients retire with confidence.
Andy holds a Bachelor of Science in Industrial Engineering from Rochester Institute of Technology in Rochester, New York, and a Master of Science in Finance from Bentley University in Waltham, Massachusetts. Specializing in retirement income planning, Andy completed a comprehensive financial industry education program at The American College of Financial Services and was awarded the Retirement Income Certified Professional® designation. He is frequently quoted in the media as a financial expert.
Andy and his wife, Susan, live in Topsfield, Massachusetts, and have two beautiful daughters. Outside of work, he is an automobile enthusiast, enjoys taking road trips, and loves the Outer Banks of North Carolina. In his spare time, he volunteers with the local high school varsity girl’s basketball team as the team statistician and runs the team’s website. He is passionate about supporting charities that serve our veterans and their families. To learn more about Andy, connect with him on LinkedIn.
