“Don’t simply retire from something; have something to retire to.” —Harry Emerson Fosdick
You’ve watched your retirement accounts grow over the years, knowing that one day you’d tap into them. Now that “one day” is getting closer, it’s normal to feel uncertain about what that means for your taxes.
The good news is that there are legitimate, IRS-approved strategies that may help reduce the tax impact of required minimum distributions (RMDs). Let’s go over a few of the most common ones…
In some cases, you can delay RMDs by continuing to work. If you’re still working past age 73 and contributing to your current employer’s 401(k), the IRS allows you to delay RMDs from that specific plan until you retire.
A few important caveats:
- This applies only to your current employer’s plan.
- Old 401(k)s still require RMDs on schedule unless rolled over.
- Traditional IRAs are never eligible for the “still-working” exception.
- This exception does not apply if you own more than 5 percent of the company.
One practical question to consider: Is delaying worth it for you? That depends on your health, your income needs, and how working fits into your life right now.
Donating to charity can also help reduce your required minimum distribution taxes. A Qualified Charitable Distribution (QCD) lets you transfer funds directly from your IRA (not a 401(k)) to a qualified charity. The donated amount counts toward your RMD and is excluded from your taxable income.
You can donate up to 100K per year, indexed for inflation (projected to be approximately 108K in 2025 and 115K in 2026, per person).
Just a few caveats to note here: The money must move directly from the IRA custodian to the nonprofit. Also, you can’t double-dip by also claiming the donation as an itemized charitable deduction.
As another strategy, a Roth conversion could potentially help you avoid RMDs altogether. A Roth conversion involves moving money from a tax-deferred account (like a traditional IRA) into a Roth IRA, which has no RMDs and allows tax-free withdrawals in retirement.
But there’s a trade-off: you must pay ordinary income tax on the amount converted in the year of conversion.
For some people, it can still be worth considering. A Roth conversion creates a source of tax-free retirement income and may help reduce future Social Security taxation or Medicare IRMAA surcharges.
The Roth conversion strategy might make sense for you if:
- You have some years with lower income before RMD age,
- You can pay the conversion tax from outside funds,
- You’re thinking about long-term tax planning (including what you might leave to heirs).
Final thoughts
Let me establish here that this information is for educational purposes only and should be discussed with a qualified tax professional to determine how it may apply to your specific situation. (If helpful, I’m happy to talk through these concepts with you. Just grab a time on one of our calendar’s. Henry, Tina, Scott or I will be glad to help.)
What’s important is that you approach required minimum distribution taxes with a plan. The timing, strategy, and order in which you draw from your accounts can drastically change how much tax you may pay over your retirement.
And if you’re nearing RMD age and aren’t sure how to manage the potential tax impact, please don’t feel like you need to figure this out alone. My team and I can help explain the rules and planning considerations involved:
