Apr 30, 2026
The Thing Nobody Warns You About: Required Minimum Distributions (RMDs)
Introduction
Questions answered in this post: What age do RMDs start now? What happens if I forget one? Can I still give to charity from my IRA? Why do people call this the “tax torpedo”?
I’m guilty of it.
The government is guilty of it.
Chances are, many of you are too.
I’m talking about the idea of kicking the can down the road—letting my future self solve a problem.
For 40 years, you’ve been told the same thing: put money in the 401(k), put money in the IRA, don’t touch it.
Good advice. It worked.
Then one day, you hit your early 70s, and Uncle Sam taps you on the shoulder and says, “Remember all that money you didn’t pay taxes on? Time to start.”
That tap on the shoulder is a Required Minimum Distribution (RMD).
It’s the government’s way of finally collecting on decades of tax-deferred growth.
Under the current rules, most people have to start taking RMDs at age 73. If you were born in 1960 or later, that age jumps to 75.
In this case, it’s not a problem that you saved taxes up front. The issue is waiting to address the unpaid taxes until you are forced to take distributions.
How Do RMDs Work?
The math is simple, but the rules can be confusing.
Start with the ending balance of your traditional IRAs (non-Roth) and other retirement accounts.
Divide that number by a divisor found in the Uniform Lifetime Table published by the IRS.
In your first year, it’s usually somewhere around 3.8% of your retirement account balance.
That’s the amount that needs to be withdrawn by the end of the current year.
You do have some extra leeway in the first year of RMDs, but it’s good practice to complete them by December 31.
What Happens if You Don’t Take Your RMD On Time?
You will be penalized 25% of the amount not withdrawn.
Not ideal.
What Else Do RMDs Impact?
Social Security taxation.
Medicare premiums.
Marginal tax brackets.
Capital gains taxation.
To name a few…
Each client’s situation will be different, but as you can see, it’s not *just* paying taxes on the distribution. It can have a ripple effect on other areas of your tax life.
Some planners refer to this as a “tax torpedo.”
What Can One Do to Avoid RMDs?
Short answer: nothing.
Long answer: for those charitably inclined, a Qualified Charitable Distribution (QCD) can redirect an RMD to a qualified charity.
This strategy allows a taxpayer to satisfy the RMD *and* support their favorite charity, without the additional income showing up on their taxable income.
How Can One Plan for RMDs?
The key is to have a plan —whatever it is. Once they start, they never end and typically don’t get smaller.
Roth conversions can be a useful tool to mitigate the impact, but they aren’t for everyone.
If you are still saving, diversifying your tax bucket can give you optionality once you enter into the withdrawal phase of life.
As mentioned before, QCDs can be an option for certain people.
The first step is to estimate your future RMDs.
Key Action Item: If you’re within five years of your RMD start age, work with a financial professional to run a projection of what your RMDs will actually look like, because the number usually surprises people.
FAQs
Q: Do I have to take my RMD from every account separately?
A: For IRAs, you can total them up and take the full amount from one account. For 401(k)s and similar employer plans, you have to take the RMD from each plan separately.
Q: What if I don’t need the money?
A: You still have to take the distribution, but you can reinvest it in a regular taxable brokerage account, gift it to family, or use a Qualified Charitable Distribution if you’re charitably inclined.
Q: Does my spouse’s IRA count toward my RMD?
A: No. RMDs are calculated per individual, per account owner. You can’t combine them with a spouse’s.
