A lot of people reach age 73 and get a surprise. Not a bad surprise, exactly — more of a "wait, I didn't realize this would affect that" moment. Required minimum distributions, or RMDs, can show up and quietly rearrange your tax picture in ways that nobody warned you about ahead of time.
The good news is that the tax effects of RMDs are predictable. And predictable means plannable — especially if you start thinking about them a few years before they begin.
What RMDs Actually Are
An RMD — required minimum distribution — is the amount the IRS requires you to withdraw each year from most tax-deferred retirement accounts. This includes traditional IRAs, 401(k)s, 403(b)s, and similar accounts. The logic behind them: you got a tax break when you put that money in, and the government eventually wants its share.
Under current rules, RMDs begin at age 73. (If you turned 72 before January 1, 2023, different rules may apply to you — the IRS RMD page has the full details.) The amount you must withdraw each year is calculated by dividing your account balance by a life expectancy factor the IRS provides. As you age, that factor decreases and your required withdrawal increases.
If you don't take your RMD, the penalty is steep: 25% of the amount you should have withdrawn. So these aren't optional.
Three Ways RMDs Can Affect Your Tax Bill
They add to your taxable income. Every dollar of your RMD counts as ordinary income in the year you take it. If your total income for the year — Social Security, investment income, and your RMD combined — crosses a bracket threshold, a portion of your income gets taxed at a higher rate. Someone with $50,000 in other income and a $30,000 RMD may find themselves in a meaningfully different situation than they expected.
They can make more of your Social Security taxable. This one surprises people. Social Security benefits aren't automatically fully taxable — how much gets taxed depends on your "combined income" (your adjusted gross income, plus any tax-exempt interest, plus half of your Social Security benefit). If that number exceeds $34,000 as a single filer or $44,000 as a married couple filing jointly, up to 85% of your Social Security benefit becomes taxable. An RMD can push you past those thresholds if you weren't there already. The Social Security Administration's benefits planner explains how this calculation works.
They can trigger Medicare premium surcharges. Medicare Part B and Part D premiums aren't one-size-fits-all. Higher-income beneficiaries pay more through what's called IRMAA — the Income-Related Monthly Adjustment Amount. Medicare looks at your income from two years prior when setting your premiums. So a large RMD in 2026 could affect what you pay for Medicare in 2028. The surcharges are applied in tiers based on income. If your income crosses the first threshold (currently just above $106,000 for individuals), your Part B premium increases meaningfully. You can find current IRMAA brackets on Medicare.gov.
Planning Before RMDs Start
The years between retirement and age 73 are often the best window to act. If you've stopped working but haven't started taking Social Security yet, your taxable income may be lower than it will be once RMDs and Social Security both kick in. That gap is worth paying attention to.
Roth conversions. Converting a portion of your traditional IRA to a Roth IRA during those lower-income years means you pay tax on the conversion now, at your current rate, and those funds are no longer subject to RMDs. Future growth and qualified withdrawals from the Roth are tax-free. A 67-year-old with several years before RMDs begin and a tax rate lower than they expect in their 70s may find converting $20,000 to $30,000 per year a worthwhile strategy. The IRS has a Roth IRA overview with conversion rules.
Qualified Charitable Distributions (QCDs). Once you're 70½ or older, you can transfer money directly from your IRA to a qualified charity — up to $108,000 per year (indexed for inflation). This counts toward your RMD, but it doesn't show up in your adjusted gross income the way a regular withdrawal would. If you give to charity anyway, this is worth understanding. The IRS page on QCDs has the details on eligibility and how it works.
Spreading withdrawals before 73. You're never required to wait until 73 to take money out of your IRA. Taking strategic withdrawals in the years before RMDs begin can reduce the account balance that future RMDs will be calculated on. Done thoughtfully, this can level out your income across years rather than letting it spike.
What You Can Do Right Now
If you're within five years of RMD age, it's worth pulling together a rough estimate of what your annual withdrawals will look like. The IRS provides the Uniform Lifetime Table to help you estimate your required amount.
From there, the picture becomes clearer: how much will your combined income be, where will it put you in relation to Social Security taxation thresholds, and whether any proactive steps make sense for your situation.
There's no single right answer here. Someone with a modest IRA, a pension, and Social Security may find RMDs have little impact. Someone with a large IRA and no other income might find them the most important tax variable in retirement. The specifics matter, and they're worth running through with a tax professional who understands retirement income.
What's consistent across almost every situation: knowing what's coming is better than being surprised by it.
This is educational information, not professional advice. Retirement rules change — Social Security, Medicare, and tax law are all subject to updates. Always verify current information with official government sources or a qualified professional before making decisions.