Don't Let the IRS Empty Your Retirement Accounts

The IRS forces you to withdraw money from your retirement accounts whether you need it or not. Miss the deadline? They'll hit you with a 25% penalty. But smart retirees use three simple strategies to minimize the damage and keep more of their money.

Here's the reality most people don't want to face: Once you hit your RMD age (either 73 or 75 for most people), the IRS stops being your friend. They're done letting you defer taxes on that traditional IRA or 401k. They want their money. And they want it by December 31st each year.

But here's what nobody tells you. Once RMDs start, your tax planning options shrink dramatically. The flexibility you had in your 60s? Gone. The ability to control your tax bracket? Much harder.

Think of it like the NBA playoffs. During the regular season, coaches have tons of flexibility. They can rest players, experiment with lineups, and try new strategies. But once the playoffs start? The margin for error disappears. Every decision matters more. Every mistake costs you.

That's exactly what happens with RMDs. The time to plan is now, before you're forced into the game.

Let's start with the basics, because getting this wrong is expensive.

Your RMD age depends on when you were born:

The IRS calculates your RMD using your account balance from December 31st of the previous year. They divide that by a life expectancy factor from their tables. The result? Your minimum required distribution.

Here's the key word: minimum. You can always take more, but you cannot take less.

Now here's something most people miss. You don't have to take your RMD from every account separately. If you have multiple traditional IRAs, you can calculate the total RMD for all of them, then withdraw that amount from just one account. This gives you flexibility in which investments you sell and when.

One of the biggest mistakes retirees make? Taking their entire RMD in December.

This creates a massive income spike in one month. Instead, set up monthly distributions throughout the year.

Here's why this works:

The key is automation. Set up systematic withdrawals from your IRA to your checking account. Most custodians make this simple. You specify the amount and frequency, and they handle the rest.

No more December panic. No more accidentally missing deadlines.

This is where the magic happens for charitable minded retirees.

A Qualified Charitable Distribution (QCD) lets you send money directly from your traditional IRA to a qualified charity. The distribution counts toward your RMD, but it never appears as income on your tax return.

Let me repeat that. The money satisfies your RMD requirement, but you pay zero income tax on it.

For 2025, you can do up to $108,000 in QCDs per year if you're 70 and a half or older. That's per person.

Here's the best part: It also helps you avoid IRMAA costs on Medicare. IRMAA is the Income Related Monthly Adjustment Amount. If your income is too high, Medicare Part B and Part D premiums can skyrocket. We're talking an extra $4,000 to $5,000 per year in Medicare costs for higher income retirees.

But QCDs don't count as income, so they don't trigger IRMAA.

You satisfy your RMD. Help your favorite charity. Avoid income taxes. And keep your Medicare premiums low. It's a quadruple win. Rare in tax planning.

The process is straightforward, but the details matter:

Here's a strategy most people don't know exists.

You can delay your very first RMD until April 1st of the year after you turn your RMD age. But there's a catch. If you delay your first RMD, you'll have to take two RMDs in that second year. The delayed first one, plus your second year's regular RMD.

Why would anyone want this double hit?

Let me share a quick example. One client retired the year she turned 73, which was also her first RMD year. But she had employment income of $500,000 that year. That's more than double what her RMD would have been.

Taking her RMD on top of her huge salary would have pushed her into the highest tax brackets and triggered massive IRMAA costs.

So the delay strategy was used. In her first retirement year, with no employment income, she could handle both RMDs at a much lower tax rate. This saved thousands in taxes and kept Medicare premiums reasonable.

But this only works if you have a good reason for the delay:

The key to RMD success is planning ahead. Don't wait until December to figure this out.

Start planning now:

Remember, once RMDs start, your tax planning flexibility decreases significantly. But with the right strategy, you can still minimize the tax impact and maintain some control.

The worst approach? Ignoring RMDs until the last minute. That leaves you scrambling, limits your options, and often results in paying more tax than necessary.

Smart retirees treat RMDs like any other part of their financial plan. Something to be managed proactively, not reactively.

Want to see the full breakdown with real examples? Visit our website to watch the complete video and discover more tax-saving strategies for retirement.

Education only, not advice. Consult your professional(s).