Understanding RMDs: Smart Strategies to Minimize Taxes in Retirement
- shaybachelder
- 17 hours ago
- 2 min read
If you’re approaching or past age 73 and have a traditional retirement account, Required Minimum Distributions (RMDs) are part of your financial reality. But while RMDs are unavoidable, there are smart ways to manage their tax impact and support your long-term goals.
Here’s what you need to know—and a few ways you might reduce your tax burden.
✅ What Are RMDs?
Once you reach age 73, you’re required to withdraw a set amount each year from traditional IRAs, 401(k)s, and similar accounts. These withdrawals are called Required Minimum Distributions, and they’re taxable as ordinary income.
RMDs must be taken by December 31 each year, based on your account balance as of the previous December 31.
🔄 Can I Do a Roth Conversion Instead of an RMD?
A common question we hear is: Can I convert to a Roth IRA instead of taking my RMD?
Short answer: No.You must take your RMD first. After that, you’re free to convert other funds to a Roth IRA—but you can’t use the RMD amount itself as part of a Roth conversion.
🌱 Why Roth IRAs Still Matter
Roth IRAs are powerful tools in retirement planning. Here’s why:
No RMDs during your lifetime
Tax-free withdrawals, if you meet the rules
Tax-efficient inheritance options for non-spouse beneficiaries
Converting to a Roth early on (before RMDs begin or in low-income years) can shrink future RMDs and lower long-term taxes.
💡 Tip: Time Roth Conversions Wisely
Because Roth conversions are taxable, choosing the right year matters. If you expect a lower income year (say, after retirement but before RMDs begin), that may be an ideal time to convert.
Also, funds from your RMD can be used to pay the taxes due on a Roth conversion—just not for the conversion itself.
💸 Can I Use RMD Money to Fund a Roth IRA?
Indirectly, yes. If you have earned income (from work or self-employment), and your total income is under IRS limits, you can contribute to a Roth IRA—even in retirement.
For 2025, the income limits are:
Filing Status | MAGI Limit for Full Contribution |
Single | Less than $150,000 |
Married Filing Jointly | Less than $230,000 |
Remember: You need earned income to contribute—not just investment income or pension payments.
❤️ Consider a Qualified Charitable Distribution (QCD)
If you’re charitably inclined, a Qualified Charitable Distribution (QCD) lets you give directly from your IRA to a charity—and satisfy your RMD at the same time.
You must be at least 70½
The 2025 limit is $108,000
QCDs aren’t taxable and reduce your future RMDs
It’s one of the most tax-efficient ways to give if you don’t need the RMD income.
📌 Bottom Line
RMDs are a required part of retirement—but with smart planning, they don’t have to be a tax burden. Whether through Roth conversions, charitable giving, or optimizing contributions, there are strategies available.
Need help with your RMD strategy for 2025? Let’s talk.We’ll review your income, accounts, and tax situation to create a personalized plan that works for you.
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