Required Minimum Distributions can push you into a higher tax bracket — and raise your Medicare premiums — without warning. Here's how RMDs work, how they're taxed, and the strategies Oak Road Wealth Management uses to lower them.
Required Minimum Distributions (RMDs) are the minimum amounts the IRS forces you to withdraw each year from tax-deferred retirement accounts like traditional IRAs and 401(k)s, starting at age 73 (or 75, depending on your birth year). RMDs are taxed as ordinary income, and because you have no choice but to take them, they can push you into a higher tax bracket and increase your Medicare premiums through IRMAA surcharges. The good news: strategies like Roth conversions and Qualified Charitable Distributions (QCDs) can meaningfully reduce future RMDs and the tax bill that comes with them.
At Oak Road Wealth Management, a fee-only fiduciary financial planning firm based in Lee's Summit, Missouri and serving clients nationally, we build RMD strategy into every retirement plan long before a client's first distribution is due. Below is a complete guide to how Required Minimum Distributions work, how they're calculated and taxed, and what you can do to keep them under control.
Required Minimum Distributions are mandatory annual withdrawals from tax-deferred retirement accounts — traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer plans like 401(k)s and 403(b)s. These accounts let you defer taxes for decades, but the IRS eventually requires you to start withdrawing the money — and paying tax on it.
Roth IRAs are the major exception. Because Roth contributions are already taxed, original Roth IRA owners never have RMDs during their lifetime. Roth 401(k) and Roth 403(b) accounts also stopped requiring lifetime RMDs.
Your RMD starting age depends on your birth year, thanks to changes made by the SECURE Act and SECURE 2.0:
Not necessarily. You have until April 1 of the year after you reach your RMD age to take your first distribution. Every RMD after that is due by December 31 of the year in question. Delaying your first RMD to April means you'll take two RMDs in that same calendar year — which can bunch income and push you into a higher bracket, so it's rarely the best move for most people.
Your RMD is your retirement account balance as of December 31 of the prior year, divided by a life-expectancy factor from an IRS life expectancy table (most people use the Uniform Lifetime Table in IRS Publication 590-B).
For example, a 80-year-old with a $1,500,000 IRA balance and a distribution factor of roughly 20.2 would owe an RMD of about $74,257 for the year. The factor decreases as you age, which means the percentage of your account you're required to withdraw increases each year.
If you have multiple traditional IRAs, you can calculate each account's RMD separately and then withdraw the total from any one IRA or combination of them. 401(k) RMDs generally must be taken separately from each plan.
Yes. RMDs from traditional, tax-deferred accounts are taxed as ordinary income in the year you receive them, at your regular federal (and Missouri state) income tax rate — there's no capital gains treatment and no way to opt out. This is the trade-off for decades of tax-deferred growth: the IRS gets its share, on its schedule, whether you need the money or not.
Yes, and this is one of the most overlooked consequences of RMDs. Because the distribution is forced — not optional — it lands on top of your Social Security income, pension income, and any other earnings for the year. For retirees with substantial IRA or 401(k) balances, this "stacking effect" can be enough to move an entire slice of income into the next marginal tax bracket, even if your spending needs haven't changed at all.
They can. Medicare Part B and Part D premiums are subject to IRMAA (Income-Related Monthly Adjustment Amount) surcharges once your Modified Adjusted Gross Income crosses certain thresholds — roughly $109,000 for single filers and $218,000 for married couples filing jointly in 2026, based on your income from two years prior. Because RMDs are added directly to your MAGI, a large RMD can trigger a surcharge tier that adds hundreds of dollars a month, per Medicare enrollee, to your household's healthcare costs — a cost many retirees don't see coming until the notice arrives.
The IRS imposes an excise tax penalty on any RMD amount not withdrawn on time — 25% of the missed amount, reduced to 10% if you correct the mistake within a two-year correction window. Given how steep this penalty is, tracking RMD deadlines across every account you own is one of the simplest but most important parts of retirement income planning.
The good news is that RMDs aren't entirely out of your control — they're a function of your account balance, and there are legitimate ways to manage that balance, and the tax hit, over time.
Yes. A Roth conversion moves money from a traditional IRA into a Roth IRA, and you pay ordinary income tax on the converted amount in the year of the conversion. In exchange, that money is permanently removed from your future RMD calculation, since Roth IRAs have no lifetime RMDs. Converting gradually during lower-income years — for example, the years between retirement and age 73 — can shrink your traditional IRA balance before RMDs even begin, reducing the size of future forced withdrawals and the tax bracket and Medicare premium pressure that come with them.
A Qualified Charitable Distribution lets IRA owners age 70½ or older send money directly from a traditional IRA to a qualifying 501(c)(3) charity — up to $111,000 per person in 2026. A QCD counts toward satisfying your RMD for the year, but the amount is excluded from your taxable income entirely. That's a meaningful advantage over writing a check to charity and claiming an itemized deduction, since a QCD lowers your AGI regardless of whether you itemize, which can also help you stay under IRMAA and other income-based thresholds.
RMDs aren't just a once-a-year paperwork task — they're a recurring tax event that compounds over a retirement that can last 20-30 years. At Oak Road Wealth Management, our fee-only fiduciary team in Lee's Summit, Missouri and serving clients nationally helps clients plan for RMDs years in advance, using Roth conversions, QCDs, and coordinated withdrawal strategies to reduce lifetime taxes and protect Medicare premiums, not just meet the minimum requirement.
RMDs start at age 73 for people born between 1951 and 1959, and age 75 for people born in 1960 or later.
No. Original owners of Roth IRAs are never required to take RMDs during their lifetime, since Roth contributions are made with after-tax dollars.
The penalty is 25% of the amount you should have withdrawn, reduced to 10% if you correct the shortfall within two years.
Yes, as long as your QCD amount is equal to or greater than your RMD for the year and stays within the annual QCD limit ($111,000 per person in 2026).
Yes. RMDs are included in the income calculation the IRS uses to determine how much of your Social Security benefit is taxable, which is another reason large, unplanned RMDs can have ripple effects across your tax return.
Written by Andrew Matz, Financial Planner at Oak Road Wealth Management.
