The government has a plan for your retirement savings.
You may not like it.
Starting at age 73, the federal government requires you to withdraw a specific dollar amount from every traditional IRA (Individual Retirement Account) and 401(k) you own – every year, for the rest of your life, whether you want the money or not. This mandatory annual withdrawal is called a required minimum distribution. You pay income taxes on every dollar of it.
For Americans who have spent decades building tax-deferred retirement accounts, this is not a minor inconvenience. It is a structural problem – and the size of the problem depends entirely on how much you have saved.
At $1.6 million in combined tax-deferred accounts, your required minimum distribution in year one is approximately $62,700. Add Social Security income, a small pension, or any other income source, and you may find yourself paying taxes in retirement at a rate higher than you paid while working.
The good news: there is a window to act. But it closes at 73.
What a Required Minimum Distribution Is – and Why It Exists
A traditional IRA and a traditional 401(k) are tax-deferred accounts. Tax-deferred means the government gave you a tax break when you contributed. You did not pay income taxes on that money going in. In exchange, the IRS deferred those taxes – it did not forgive them. Every dollar in those accounts is pre-taxed income that eventually must be reported and taxed.
The required minimum distribution is the mechanism the IRS uses to collect those deferred taxes. The government cannot let that money sit tax-free forever. At 73, it begins forcing withdrawals based on a formula tied to your account balance and your life expectancy.
Here is how the formula works: the IRS publishes a table called the Uniform Lifetime Table. It assigns a divisor to each age based on life expectancy. At age 73, the divisor is 26.5. You divide your account balance on December 31 of the prior year by that number to get your required minimum distribution for the current year.
$1,600,000 divided by 26.5 equals $60,377 in required withdrawals – in year one.
The divisor shrinks every year. At 80, it is 20.2. At 85, it is 16.0. The older you get, the larger your forced withdrawal – assuming your account keeps growing.
And if you do not take the full required minimum distribution by December 31 each year, the penalty is 25 percent of the amount you failed to withdraw. The IRS does not have patience for this.
Why Required Minimum Distributions Are a Problem Beyond Just Taxes
The tax bill alone is significant. But the damage from required minimum distributions compounds in two additional ways that most retirees do not anticipate.
The IRMAA trigger. IRMAA stands for Income-Related Monthly Adjustment Amount. It is a Medicare premium surcharge added to your monthly Part B and Part D costs when your income crosses certain thresholds. In 2026, a married couple with combined income above $212,000 pays an IRMAA surcharge that can add hundreds of dollars per month to Medicare costs. Every dollar of required minimum distribution income counts toward that threshold. A large required minimum distribution can push a couple from no surcharge to thousands of dollars per year in additional Medicare premiums – permanently, for as long as the required minimum distributions continue.
The Social Security tax trap. Social Security retirement benefits are not always taxed – but they can be. If your combined income (which includes wages, pension, investment income, and required minimum distributions) exceeds $44,000 for a married couple, up to 85 percent of your Social Security benefit becomes taxable income. A large required minimum distribution can make the difference between paying taxes on 50 percent of your Social Security and paying taxes on 85 percent of it. For a couple receiving $40,000 per year in combined Social Security, that difference is approximately $7,000 in additional taxable income annually.
These three forces – income taxes, IRMAA surcharges, and Social Security taxation – compound each other. A retiree who has saved well and follows the standard rules can end up paying an effective tax rate in retirement significantly higher than they paid during their working years.
The Strategies That Change the Outcome
The window to act on required minimum distributions is the period between now and age 73. Three strategies are available to reduce the burden:
Roth conversions. As covered in our companion article on Roth conversions for W-2 professionals, converting money from a traditional IRA or 401(k) to a Roth account – and paying taxes on the converted amount today – permanently removes that money from the required minimum distribution calculation. Roth accounts are not subject to required minimum distributions during the account holder’s lifetime. The ideal conversion window is ages 55 to 72 for most retirees, particularly in years when other income is lower and the tax cost of conversion is minimized.
Qualified Charitable Distributions (QCDs). If you are 70½ or older and charitably inclined, a qualified charitable distribution is a powerful tool. A qualified charitable distribution is a direct transfer from your IRA to a qualified charity – up to $108,000 per year in 2026. The transferred amount counts toward your required minimum distribution for the year but is excluded from your taxable income entirely. It does not show up as income on your tax return. This means no taxes, no IRMAA impact, no Social Security taxation increase from that portion of the required minimum distribution. For retirees who already give to their church, a nonprofit, or any qualified charitable organization, redirecting that giving through a qualified charitable distribution is a straightforward tax win.
7702 accounts. Section 7702 of the Internal Revenue Code governs a class of tax-advantaged account that carries no required minimum distributions, no IRS contribution limits (beyond funding guidelines internal to the structure), and tax-free growth and withdrawal potential. A 7702 account is not a retirement account in the traditional sense – it is a tax code category that permits certain life insurance structures to function as unlimited, tax-free savings vehicles. Funding a 7702 account in the years before retirement redirects savings into a structure that will never generate a required minimum distribution. This is particularly relevant for high earners who have already maxed their Roth IRA and 401(k) options and are building additional savings that would otherwise land in taxable accounts.
How SECURE 2.0 Changed the Timeline
SECURE 2.0 is the Setting Every Community Up for Retirement Enhancement 2.0 Act, signed into law in December 2022. Among its many provisions, it pushed the required minimum distribution starting age from 72 to 73 for anyone born between 1951 and 1959. For those born in 1960 or later, the required minimum distribution age will eventually be 75.
This change gave millions of Americans an additional year or two of tax-deferred growth – and, more importantly, an additional year or two to execute Roth conversions and other planning strategies before forced withdrawals begin.
That one-to-two-year extension is valuable only if it is used. An extra year of inaction is not a gift. An extra year of conversion is.
Case Study: The Couple Who Had More Than They Realized
Consider a husband and wife, both age 68, preparing to retire. Between them, they have $1.6 million in traditional IRA accounts – his $950,000, hers $650,000. Neither has any significant Roth savings. They plan to live on Social Security ($58,000 combined) and a small pension ($18,000) until their required minimum distributions begin.
At age 73, the combined first-year required minimum distribution on $1.6 million is $60,377. Added to Social Security and pension, their household income that year is $136,377. Their federal tax liability, after standard deduction, is approximately $21,400 – an effective rate of roughly 15.7 percent. IRMAA surcharges begin, adding $3,564 per year in combined Medicare premium increases. Up to 85 percent of their Social Security benefit is now taxable.
By age 80, with conservative account growth of 5 percent annually offset by required minimum distribution withdrawals, the combined distribution has grown to approximately $89,000. Their total income exceeds $165,000. Tax liability has grown proportionally.
Over 20 years of required minimum distributions, they will pay an estimated $390,000 in federal income taxes on money that grew “tax-deferred.”
Now consider the same couple executing a conversion strategy starting at 68. They convert $100,000 per year for five years, paying taxes at the 22 percent marginal rate – approximately $22,000 per year in additional taxes. Over five years, they pay $110,000 in taxes to convert $500,000 to Roth. At 73, their combined required minimum distribution baseline is reduced to approximately $41,000. IRMAA thresholds are either avoided or reduced. Social Security taxation is lower. Estimated lifetime tax savings from the conversion strategy: $94,000, plus reduced Medicare premium exposure of $14,200 over retirement.
The $110,000 in conversion taxes is real. The $108,000+ in lifetime savings is also real. And the converted $500,000 continues to compound tax-free with no future required minimum distribution obligation attached.
Frequently Asked Questions
What is the penalty for missing a required minimum distribution?
The IRS imposes an excise tax of 25 percent on the amount of the required minimum distribution you failed to take. If you correct the missed distribution within two years, the penalty is reduced to 10 percent. SECURE 2.0 reduced this penalty from the prior 50 percent, but it remains significant.
Can I give my required minimum distribution to my children instead of taking it myself?
You cannot redirect your required minimum distribution to another person to avoid the tax. You must withdraw the required amount, report it as income, and pay the tax. However, there is no rule against gifting money after you receive it – you can take the distribution, pay taxes on it, and then gift the after-tax proceeds. Annual gift tax exclusions apply.
Does a Roth IRA have required minimum distributions?
No. Roth IRA account holders are not required to take distributions during their lifetime. Roth 401(k) accounts also have no required minimum distributions under current law as of 2024, following a SECURE 2.0 change that aligned Roth 401(k) rules with Roth IRA rules.
What is the difference between a qualified charitable distribution and a regular charitable contribution?
A qualified charitable distribution goes directly from your IRA to the charity and is excluded from your taxable income entirely. A regular charitable contribution requires you to first withdraw the money (pay taxes on it), then donate it, then take a deduction if you itemize. The qualified charitable distribution bypasses the income recognition step entirely, making it worth significantly more in most cases.
Does inheriting a required minimum distribution account change the rules?
Yes. Under SECURE 2.0 and the original SECURE Act, most non-spouse beneficiaries who inherit an IRA must empty the account within 10 years. The inherited IRA cannot simply be stretched over a lifetime like under the old rules. This makes advance planning – converting before death, reducing account size through distributions, or using 7702 structures – even more valuable for estate planning purposes.
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King Legacy Group specializes in building retirement income plans that account for required minimum distributions, IRMAA exposure, and Social Security taxation from the outset. The goal is a tax map across your full retirement – not just the accumulation phase.
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