Don’t Miss This: What Happens if You Skip Your RMD

Strategies & Tips to Handle RMDs Smartly

Here are some ideas seniors can use to manage RMDs more effectively and reduce unnecessary tax burdens:

1. Plan ahead for the first RMD.
   Think in advance whether you’ll take that first RMD in the year you turn the required age or delay until the following year (if allowed). Be aware that delaying means two RMDs in the same year.

2. Use qualified charitable distributions (QCDs) if you qualify and are charitably inclined.
   QCDs allow you to send retirement account dollars directly to a charity and have that count toward your RMD, while excluding it from your taxable income (up to certain limits). This can be very useful if you don’t need all — or any — of the RMD for living expenses.

3. Consider Roth conversions earlier.
   Converting portions of your traditional IRA or 401(k) to a Roth IRA before you reach RMD age (or early in retirement) can lower future RMD amounts, since Roth IRAs are not subject to RMDs during your lifetime. But remember, Roth conversions themselves are taxable events, so this strategy requires careful planning.

4. Coordinate with tax planning.
   Since RMDs increase taxable income for the year, work with your tax advisor to see how RMDs interact with your other income sources (Social Security, dividends, pensions) and possible deductions or credits.

5. Keep good records.
   It’s essential to know your account balances at the relevant dates, which retirement plans apply, and make sure you are using the correct IRS tables. Mistakes can be costly.

6. Don’t leave money in accounts unaware.
   Even if you don’t need the RMD for living expenses, the money must still be withdrawn (unless you have a Roth IRA or are still working under some plans). Decide what to do with it: reinvest in taxable accounts, use it for things you need, or donate.