Your RMDs Don't Have to Work Against You

Required minimum distributions are one of the most misunderstood pieces of retirement income planning — and one of the most consequential. Without a deliberate strategy, RMDs can push you into a higher tax bracket, trigger Medicare surcharges, and erode decades of tax-deferred growth faster than necessary. We help retirees across New Hampshire and New England turn RMD obligations into a coordinated part of their broader retirement plan, not an afterthought that shows up every April.

What the SECURE Act Changes Mean for Your Retirement Accounts

The SECURE Act and SECURE 2.0 legislation shifted the RMD landscape significantly. The age at which distributions must begin is now 73 for most retirees, with further changes scheduled for those born after 1960. Inherited IRA rules were restructured entirely, eliminating the stretch IRA strategy for most non-spouse beneficiaries and replacing it with a 10-year distribution window. These aren't minor technical updates — they affect withdrawal timing, tax exposure, and estate planning outcomes in ways that require a fresh look at plans built under the old rules.

 

If your retirement strategy was designed more than a few years ago, it may not reflect the current RMD framework. We review the updated rules with every client to make sure their plan accounts for the current law, not the one that used to exist.

The Real Cost of Getting RMDs Wrong

The IRS penalty for missing or underpaying an RMD is 25% of the amount that should have been distributed — reduced to 10% if corrected promptly, but still a significant hit. Beyond the penalty risk, unmanaged RMDs carry compounding costs that most retirees don't anticipate until they arrive:

 

  • RMD income stacks on top of Social Security, wages, and investment income — pushing more of your total income into higher federal and state tax brackets
  • Larger income in a given year can trigger IRMAA surcharges, increasing your Medicare Part B and Part D premiums by hundreds or thousands of dollars annually
  • A poorly timed RMD can reduce the effectiveness of Roth conversion strategies planned for the same year
  • Inherited IRA distributions under the 10-year rule can create significant tax spikes if not spread intentionally across the distribution window
  • Failing to coordinate RMDs with charitable giving means leaving a qualified charitable distribution opportunity unused

 

The goal of RMD planning isn't just to avoid penalties. It's to minimize the total tax cost of your distributions over time and keep your income picture as clean and predictable as possible.

RMD Planning as Part of a Larger Retirement Income Strategy

Required minimum distributions don't exist in isolation. They're one income stream among several — alongside Social Security, investment withdrawals, pension income, and part-time earnings — and how they interact with each other determines your actual tax rate in retirement. Our approach to RMD planning New Hampshire clients rely on is integrated into the full retirement income picture from the start. We coordinate RMD timing with Social Security claiming decisions, Medicare enrollment, tax-efficient withdrawal sequencing, and estate planning goals so that every moving part is working in the same direction.

How We Build an RMD Strategy That Works for Your Plan

Calculate Your RMD Accurately — Every Year

RMD amounts are recalculated annually based on your account balances as of December 31 of the prior year and the IRS Uniform Lifetime Table divisor that corresponds to your age. If you hold multiple traditional IRAs, you can aggregate those balances and take the total RMD from any one account or a combination. 403(b) accounts follow a similar aggregation rule. 401(k)s and inherited IRAs must each satisfy their own RMD separately. We run these calculations for every client each year so the right amount comes out of the right accounts at the right time.

Sequence Distributions to Reduce Your Tax Exposure

When you take your RMD matters as much as how much you take. Early-year distributions give you more time to reinvest the proceeds in a taxable account, but late-year distributions give you more information about your total annual income before you commit. We look at your full income picture — Social Security, pension, investment income, and any planned Roth conversions — and help you time distributions to avoid bracket creep and IRMAA thresholds wherever possible.

Use Qualified Charitable Distributions to Reduce Taxable Income

If you are 70½ or older and charitably inclined, a qualified charitable distribution (QCD) allows you to transfer up to $105,000 per year directly from your IRA to a qualifying charity. The amount transferred counts toward your RMD but is excluded from your taxable income entirely — which is more tax-efficient than taking the distribution, paying taxes on it, and then making a charitable contribution. For clients with RMDs they don't need for living expenses, QCDs are one of the most effective tools available.

Coordinate RMDs with Roth Conversion Planning

RMDs and Roth conversions interact directly. You cannot convert an RMD — the required distribution must come out first before any conversion can occur in the same year. But the years immediately before RMDs begin are often the best window for Roth conversions, when your taxable income may be lower and your tax-deferred balances are still fully convertible. We map out this window for every client approaching the RMD start age and use it deliberately to reduce the size of future required distributions.

Plan for Inherited IRA Distributions Under the 10-Year Rule

Non-spouse beneficiaries who inherit an IRA after 2019 are generally required to distribute the entire account within 10 years of the original owner's death. Depending on the size of the inherited account and the beneficiary's own income, this can create significant tax exposure if distributions are taken unevenly or deferred entirely to year 10. We work with beneficiaries — and with clients who want to plan ahead for what their heirs will face — to map out a distribution schedule that spreads the tax impact intelligently across the 10-year window.

Frequently Asked Questions About Required Minimum Distributions

  • When do I have to start taking required minimum distributions?

    If you were born between 1951 and 1959, your RMD start age is 73. If you were born in 1960 or later, the start age increases to 75 under SECURE 2.0. The first RMD can be delayed until April 1 of the year after you reach your start age, but doing so means taking two distributions in one calendar year — which often increases your tax exposure more than taking the first distribution on schedule.

  • How is my RMD amount calculated?

    Your RMD is calculated by dividing your account balance as of December 31 of the prior year by the life expectancy factor assigned to your age in the IRS Uniform Lifetime Table. The divisor decreases each year as you age, which means the percentage of your account you're required to distribute increases over time. We recalculate this for every client annually and account for all qualifying account types.

  • Do I have to take RMDs from every retirement account separately?

    It depends on the account type. Traditional IRA balances can be aggregated, and you can satisfy the combined RMD from any one IRA or a combination. 403(b) accounts follow a similar rule. However, 401(k)s and inherited IRAs must each satisfy their own RMD independently — you cannot use a distribution from one account to satisfy the requirement for another.

  • What happens if I miss an RMD or take less than required?

    The IRS penalty for a missed or insufficient RMD is 25% of the shortfall — the amount that should have been distributed but wasn't. If the error is identified and corrected in a timely manner, the penalty may be reduced to 10%. The IRS does have a correction process, but it requires action. We track RMD deadlines for every client to prevent this situation from arising.

  • Can I use my RMD to fund a Roth IRA?

    You cannot directly convert an RMD to a Roth IRA. The required distribution must be taken first, and only amounts above the RMD threshold are eligible for conversion in the same year. However, if you don't need the RMD for living expenses, you can take the distribution, pay the applicable taxes, and then contribute to a Roth IRA separately — provided you have earned income and meet the contribution limits.

  • What is a qualified charitable distribution and who qualifies?

    A qualified charitable distribution (QCD) is a direct transfer from your IRA to a qualifying 501(c)(3) charity. You must be at least 70½ to use this strategy. The transfer counts toward your RMD for the year but is excluded from your taxable income — up to $105,000 per individual in 2024. This makes QCDs significantly more tax-efficient than taking the distribution as income and then making a separate charitable gift.