How Can You Optimize RMDs to Lower Your Retirement Tax Bill?

A Required Minimum Distribution (RMD) is the minimum amount you generally must withdraw each year from tax-deferred retirement accounts after reaching the applicable starting age. You may be able to reduce the long-term tax impact of RMDs by planning before withdrawals begin. Strategies may include partial Roth conversions, qualified charitable distributions, thoughtful withdrawal timing, account consolidation, and appropriate tax withholding. The right approach depends on your income, accounts, charitable goals, beneficiaries, and broader retirement plan.

If you have $1 million or more saved in retirement accounts, required minimum distributions could become an important part of your tax picture. The best time to think about them is often before you are required to take your first withdrawal.

Once RMDs begin, the amount you must withdraw is largely determined by IRS rules. However, you may still have choices about how the distribution fits with your other income, charitable giving, tax withholding, and long-term plans.

This matters because an RMD can affect more than the taxes you owe on the withdrawal itself. It may also influence how much of your Social Security is taxable, what you pay for Medicare in a future year, and how much remains in your retirement accounts for later in life or for your beneficiaries.

At Winthrop Partners, our fee-only fiduciary team includes CFA®, CFP®, CPA, and ChFC® professionals. We consider your RMD alongside your investments, retirement income, taxes, estate plan, and spending needs. Looking at these decisions together can help you understand the tradeoffs before choosing a course of action.

Read our newest Quick Guide “What Is Included in Comprehensive Fee-Only Financial Planning?”

What Types of Tax-Deferred Retirement Accounts are Subject to RMD Rules and Taxes?

First, it’s important to understand what tax-deferred retirement accounts are generally subject to required minimum distributions:

Individual retirement accounts

• Traditional IRAs
• Rollover IRAs
• SEP IRAs
• SIMPLE IRAs
• SARSEP IRAs
• Inherited traditional IRAs
• Inherited SEP and SIMPLE IRAs

Employer-sponsored retirement plans

• Traditional 401(k) plans
• Traditional 403(b) plans
• Governmental 457(b) plans
• Profit-sharing plans
• Money purchase pension plans
• Defined-benefit pension plans
• Keogh plans and other qualified plans for self-employed individuals
• Qualified retirement-plan annuities

Important exceptions 

• Roth IRAs: The original owner does not take lifetime RMDs. Beneficiaries generally must follow inherited-account distribution rules.
• Roth 401(k), Roth 403(b), and other designated Roth accounts: Owners no longer have lifetime RMDs. Beneficiaries remain subject to distribution rules.
• Current-employer plans: Some workplace plans allow you to delay RMDs until retirement. This exception generally does not apply if you own more than 5% of the employer, and it does not apply to traditional, SEP, or SIMPLE IRAs.
• Former-employer plans: The still-working exception generally does not delay RMDs from plans maintained by former employers.
• Nonqualified deferred compensation: These arrangements may require distributions, but they do not necessarily follow the standard RMD rules applicable to qualified retirement accounts.

Watch: Why You Should Get a Financial Plan Before You Invest: The Winthrop Way”

What Is Your Required Beginning Date for an RMD?

Your required beginning date is generally April 1 of the year after you reach the applicable RMD age. A workplace plan may allow a delay until retirement if you are not a 5% owner. Traditional, SEP, and SIMPLE IRAs generally lack that exception.

Delaying your first RMD may provide short-term flexibility, but it can place two RMDs in the following tax year. Compare both years’ expected income, deductions, Medicare exposure, charitable giving, and capital gains before choosing the April 1 option.

Can RMD Push You Into a Higher Tax Bracket?

The IRS calculation for RMDs divides your account’s balance on December 31 of the prior year by an IRS life-expectancy factor. For example, if your applicable year-end balance were $1.5 million and the factor were 26.5, the resulting RMD would be approximately $56,604. Your actual calculation depends on the correct account balance, table, age, and beneficiary circumstances.

Let’s look at a hypothetical example: Suppose you and your spouse are retired and already expect approximately $180,000 of taxable income from pensions, Social Security, interest, dividends, and portfolio withdrawals. You must also take a $56,000 RMD from a traditional IRA.

That distribution increases your estimated taxable income to approximately $236,000. Using 2026 federal tax brackets for married couples filing jointly, part of the RMD would move above the $211,400 starting point for the 24% bracket.

This does not mean all your income is taxed at 24%. Federal tax brackets work in layers, so only the income above the threshold is subject to the higher rate. Even so, the RMD could increase your total federal tax bill by thousands of dollars. 

It may also affect the taxation of Social Security, future Medicare premiums, and other income-related thresholds.

The result can be especially surprising if little or no tax was withheld from the distribution. You could reach tax-filing season with a much larger balance due than expected.

This is where a partnership with a team of fiduciary fee-only financial advisors can be beneficial.  Planning ahead allows you to estimate the combined effect of all your income sources before taking the RMD. 

At Winthrop Partners, depending on your circumstances, our review and financial advice may include tactics such as adjusting withholding, spreading income-producing transactions across tax years, completing partial Roth conversions before RMDs begin, or using a qualified charitable distribution for charitable gifts. 

The objective is not simply to satisfy the withdrawal requirement, but to understand how it fits into your complete tax and retirement-income picture.

What RMD Changes for 2026 Should You Know About?

The RMD rules 2026 reflect the SECURE Act, SECURE 2.0, and final Treasury regulations effective for distribution years beginning in 2025. It’s important to understand the new RMD rules for 2026 because they may affect both you and your beneficiaries.

• Age 73 remains the starting age for many current retirees. Under the SECURE Act 2.0 RMD schedule, the age at which RMDs begin rises to 75 in 2033 for people born in 1960 or later. Your birth year determines your required beginning date for RMDs.
• Roth workplace accounts have no lifetime RMDs for the owner. Beneficiary rules can still apply after death.
• The missed RMD excise tax is generally 25%. It may fall to 10% when a shortfall is corrected within the applicable period, and other requirements are met.
• Some inherited IRA beneficiaries must take annual distributions during the 10-year period. If the original owner died on or after the required beginning date and the beneficiary is subject to the 10-year rule, annual RMDs generally continue, and the account must be emptied by the end of year 10. Different rules apply when the owner died before that date, or the beneficiary is an eligible designated beneficiary.

How Can Roth Conversions Help Reduce Future RMDs?

If a large portion of your retirement savings is held in traditional IRAs or other tax-deferred accounts, your RMDs could become increasingly significant as you get older. One strategy you may want to evaluate before RMDs begin is a Roth conversion.

A Roth conversion moves money from a tax-deferred retirement account into a Roth IRA. You generally pay income tax on the amount converted that year, but the conversion reduces the balance that future RMDs are based on. Roth IRA owners are also not required to take RMDs for life.

The period between retirement and the start of Social Security or RMDs may provide a useful planning opportunity. Your income could be lower during those years, potentially allowing you to convert a portion of your retirement savings without moving as far into a higher tax bracket.

The key is deciding how much to convert and when. A Roth conversion does not automatically reduce your lifetime taxes. Converting too much in one year could move part of your income into a higher tax bracket or increase your Medicare premiums two years later. Future tax rates, state taxes, available cash to pay the conversion tax, estate goals, and the time available for tax-free growth should also be considered.

Rather than completing one large conversion, you may choose to evaluate smaller conversions over several years. This can provide more control over the taxable income recognized each year while gradually reducing the balance that may be subject to future RMDs. Consider discussing your options with a Winthrop Partners Pittsburgh financial advisor.

Can a Qualified Charitable Distribution Satisfy Your RMD?

Yes. If you are age 70½ or older, a qualified charitable distribution, or QCD, can be transferred directly from an eligible IRA to a qualified charity. A QCD can satisfy some or all of your RMD and is generally excluded from taxable income when the requirements are met.

This may be useful even with the standard deduction because a qualifying QCD does not first increase adjusted gross income. You cannot also deduct the same gift. Limits are indexed, and eligibility rules apply.

The funds generally must move directly from the IRA custodian to the charity. A personal withdrawal followed by a check does not become a QCD.

How Can You Coordinate an RMD With Other Retirement Income?

Before taking an RMD distribution, consider:

Which account should provide the cash? Calculate each IRA’s RMD separately, but you may generally aggregate traditional IRA RMDs and withdraw the total from one or more IRAs. Many workplace-plan RMDs must be satisfied separately.

When should you withdraw it? Monthly payments may support spending, while a later withdrawal keeps assets invested longer. Waiting until December leaves less time to fix errors or complete a QCD.

Should you distribute cash or securities? An in-kind transfer may satisfy an RMD without selling, based on fair market value. Taxable income still applies, and the asset receives a new basis.

How much should you withhold? Federal withholding from an IRA distribution is generally treated as paid evenly throughout the year, which may help address an estimated-tax shortfall. State rules also matter.

Because these choices can also affect rebalancing and estate planning, discuss these options with a fiduciary advisor who can help you model various strategies that consider your investments, tax impact, and cash-flow consequences together.

How Does a Minimum Distribution From an Inherited IRA Work?

The minimum distribution from an inherited IRA depends on the date of death, whether the owner had reached the required beginning date, the beneficiary’s status, and the 10-year rule.

Many non-spouse beneficiaries who inherited after 2019 must empty the account by the end of year 10. If the owner died on or after the required beginning date, annual RMDs may also apply in years one through nine. If death occurred earlier, delaying everything can create a large final-year tax bill.

Spouses and other eligible designated beneficiaries may have different options. The IRS beneficiary guidance explains the main categories, but inherited accounts often warrant individualized tax and legal review.

Watch: Why Should You Get a Financial Plan Before You Invest?  The Winthrop Way

Why Does a Planning-First Fiduciary Approach Matter?

As we’ve discussed in this blog, an RMD can affect your portfolio, taxes, charitable plan, Medicare costs, cash flow, and inherited assets.

Whether you are seeking a retirement planner in North Pittsburgh, a financial advisor in South Pittsburgh, financial planning in Pittsburgh, or broader wealth management in Pittsburgh, the useful question is not simply, “What is this year’s RMD?” 

It’s, “How does this distribution fit my retirement income plan over several years?”

This longer view matters for longevity risk in retirement. Reducing tax today may create more later, while recognizing some income now may reduce future pre-tax balances. High-net-worth wealth management compares both outcomes.  Schedule time with our team to discuss your RMD situation.

Frequently Asked Questions About RMDs in 2026

At what age do RMDs start in 2026?

Many IRA owners begin RMDs for the year they turn 73. SECURE 2.0 raises the applicable age to 75 beginning in 2033 for people born in 1960 or later. Older birth cohorts may be subject to earlier starting ages.

How is an RMD calculated for 2026?

Divide the relevant retirement account balance as of December 31, 2025, by the applicable IRS life-expectancy factor. Use the correct table for an owner, a spouse who is more than 10 years younger and the sole beneficiary, or an inherited-account beneficiary.

Can you convert an RMD to a Roth IRA?

No. An RMD is not eligible for rollover or conversion. You must first satisfy the year’s RMD before converting additional eligible pre-tax retirement funds to a Roth IRA.

Can you reinvest an RMD you do not need for spending?

Yes. After taxes and withholding, you may generally invest the proceeds in a taxable brokerage account, fund an eligible Roth IRA if you have qualifying compensation, give to family or charity, or use the cash for another goal. Contribution and gifting rules still apply.

How does a T. Rowe Price required minimum distribution work?

A T. Rowe Price required minimum distribution follows the same federal rules as an RMD held with another custodian. The provider may calculate or process the withdrawal, but you remain responsible for the correct amount and deadline across all relevant accounts.

Do inherited IRAs require annual RMDs in 2026?

Some do. A non-spouse beneficiary subject to the 10-year rule generally must take annual RMDs if the original owner died on or after the required beginning date, and must empty the account by year 10. Exceptions and different rules apply to other beneficiaries.

What happens if you miss an RMD in 2026?

The shortfall may be subject to a 25% excise tax, which may be reduced to 10% if corrected within the applicable period. Take the missed amount promptly, document the circumstances, and consult a tax professional about Form 5329 and possible relief.

What Should You Do Before Your Next RMD?

Start with a multiyear projection rather than a one-year calculation. Estimate future RMDs, Social Security, pensions, investment income, deductions, and possible Roth conversions. Then compare how different withdrawal and charitable-giving choices may affect taxes, Medicare premiums, liquidity, and the assets left to your beneficiaries.