RMDs force taxable income, higher tax brackets, and rising Medicare premiums, whether you need the money or not. Here's how to soften the hit.
If you've ever asked yourself why are RMDs considered bad, you're not alone. Required Minimum Distributions (RMDs) get a bad reputation among retirees, and it's not because the money itself is bad. It's because RMDs are forced income and forced taxation, whether you actually need the cash or not. At Oak Road Wealth Management, a fee-only fiduciary financial planning firm based in Lee's Summit, Missouri and serving clients nationally, we help retirees understand exactly why RMDs cause so much frustration, and more importantly, what can be done about it.
RMDs aren't inherently "bad" money; they're taxed the same as any other traditional IRA or 401(k) withdrawal. The real problem is timing and control. The IRS forces you to withdraw a set amount each year starting at age 73 or 75, regardless of whether you need the income. For retirees who already withdraw more than their RMD anyway, this rule barely matters. But for retirees who don't need the money, RMDs can push them into a higher tax bracket, increase their Medicare Part B and Part D premiums through IRMAA surcharges, and create a tax bill they didn't plan for. Strategies like Roth conversions and Qualified Charitable Distributions (QCDs) can significantly reduce or eliminate this impact.
RMDs are considered bad because they force retirees to take taxable income from tax-deferred retirement accounts on the government's schedule, not their own.
A Required Minimum Distribution is the minimum amount the IRS requires you to withdraw each year from tax-deferred retirement accounts, such as a traditional IRA, 401(k), or 403(b), once you reach age 73 or 75 (under current SECURE 2.0 rules). These accounts grew tax-deferred for decades. The IRS eventually wants its share, so it mandates withdrawals on a set schedule based on your account balance and life expectancy.
The frustration isn't the tax itself. It's the lack of choice. You don't get to decide if this is the right year to take the income. The IRS decides for you.
RMDs can push retirees into a higher marginal tax bracket by adding a large, mandatory chunk of income on top of Social Security, pensions, and other retirement income.
Every dollar of an RMD is treated as ordinary income. If you already have Social Security, a pension, or other income sources, an RMD stacks directly on top of that income. This can be enough to bump you from one federal tax bracket into the next, meaning a larger percentage of your total income is taxed at a higher rate. For retirees with large tax-deferred balances, this bracket creep can be substantial and unexpected.
Yes. A large RMD can increase your Medicare Part B and Part D premiums through a surcharge called IRMAA (Income-Related Monthly Adjustment Amount).
Medicare premiums aren't flat for everyone. The Social Security Administration looks at your Modified Adjusted Gross Income (MAGI) from two years prior to determine your premium tier. Because RMDs count as income, a large distribution can push your MAGI over an IRMAA threshold, resulting in higher monthly Medicare premiums for both you andyour spouse. This is one of the most overlooked side effects of RMDs, and one reason they carry such a bad reputation.
No. From a tax perspective, RMD income is identical to any other traditional IRA or 401(k) withdrawal. The only difference is that it's mandatory.
This is an important distinction. The IRS doesn't tax RMD dollars any differently than dollars you'd withdraw voluntarily. A $30,000 RMD is taxed the same way as a $30,000 discretionary withdrawal. The "bad" part isn't the tax treatment; it's that you don't get a say in whether, or when, that $30,000 comes out.
No. RMDs mainly create problems for retirees who wouldn't otherwise withdraw that much money.
Understanding which category you fall into is the first step in deciding whether RMD planning should be a priority for your retirement strategy.
Two of the most effective strategies are Roth conversions before RMD age and Qualified Charitable Distributions (QCDs) after RMD age.
A Roth conversion involves moving money from a traditional IRA into a Roth IRA before RMDs begin, paying the tax on the converted amount now, at today's rates. This shrinks your future traditional IRA balance, which lowers the size of your future RMDs. Roth IRAs also have no RMDs during the original owner's lifetime, so converted funds can continue growing tax-free without any forced withdrawal schedule. Roth conversions work best when done strategically over several years, filling up lower tax brackets rather than triggering a large tax bill in a single year.
For retirees who are already RMD age (73 or older) and charitably inclined, a QCD allows you to send up to $111,000 per year (2026 limit, indexed for inflation) directly from your IRA to a qualified charity. That amount counts toward satisfying your RMD, but it is excluded from your taxable income entirely. For retirees who don't need their full RMD for living expenses, QCDs are one of the most efficient ways to reduce the tax and Medicare impact of forced distributions while supporting causes they care about.
RMDs aren't a bad deal because the money is taxed unfairly. They're considered bad because they remove flexibility, forcing income and taxation on the IRS's timeline instead of yours. That forced timing can push you into a higher tax bracket, raise your Medicare premiums through IRMAA, and create tax bills you didn't plan for, especially if you weren't planning to withdraw that much in the first place. With proactive planning, tools like Roth conversions and QCDs can significantly soften or even eliminate the impact.
At Oak Road Wealth Management, we work with retirees nationwide as a fee-only fiduciary firm to build RMD strategies tailored to their specific tax situation, income needs, and charitable goals. If RMDs are on the horizon for you, or already causing a tax headache, we'd welcome the opportunity to talk through your options.
RMDs are considered bad because they force retirees to withdraw and pay tax on money whether they need it or not. This forced income can push retirees into higher tax brackets and increase Medicare Part B and Part D premiums through IRMAA surcharges.
Under current SECURE 2.0 rules, RMDs generally begin at age 73. The exact starting age depends on your birth year, so it's worth confirming your specific RMD start date with a financial professional.
You cannot avoid RMDs once they begin on a traditional IRA or 401(k), but you can reduce their size in advance through strategies like Roth conversions, or offset their tax impact after the fact through Qualified Charitable Distributions.
Yes. RMDs are taxed as ordinary income, exactly the same as any other withdrawal from a traditional IRA or 401(k).
If you fail to withdraw your full RMD by the deadline, the IRS can impose a penalty of up to 25% of the amount not withdrawn (reduced to 10% if corrected within two years). It's important to track RMD deadlines closely each year.
This article is for educational purposes only and does not constitute personalized tax, legal, or investment advice. Consult a qualified financial or tax professional before making decisions about your retirement accounts. Oak Road Wealth Management is a fee-only fiduciary financial planning firm based in Lee's Summit, Missouri, serving clients nationally.
Written by Andrew Matz, Financial Planner at Oak Road Wealth Management.
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