One of the most important and often overlooked parts of retirement planning is managing Required Minimum Distributions (RMDs). These mandatory withdrawals from tax-deferred retirement accounts can significantly affect your tax situation, income strategy, and long-term financial goals.

RMDs are the minimum amount individuals (typically retirees) must withdraw each year from tax-deferred accounts once they reach a certain age. The IRS requires these withdrawals to ensure tax-deferred savings eventually become taxable income. Accounts subject to RMDs include Traditional IRAs, SEP IRAs, SIMPLE IRAs, and employer-sponsored plans such as 401(k)s and 403(b)s. The exception is Roth IRAs, which are not subject to RMDs during the original owner’s lifetime.

When Do You Need to Start Taking RMDs?

If you turn 73 in 2025, your first RMD is due by April 1, 2026. Every year after that, RMDs must be taken by December 31. Under the SECURE Act 2.0, those born in 1960 or later will begin RMDs at age 75,.

For some retirees, RMDs provide helpful supplemental income alongside Social Security, pensions, and investment withdrawals. For others who don’t need the funds — perhaps because they’re still working or living comfortably from taxable assets — RMDs can create unwanted taxable income. That’s why planning is key.

How to Make Sure You Don’t Miss an RMD

A simple way to stay on track is to automate your withdrawals. Setting up monthly or quarterly distributions ensures your full RMD is met by year-end and can create a steady income stream, like a paycheck. Breaking the RMD into smaller payments can also make budgeting easier and help manage spending in retirement.

What Happens If You Miss an RMD?

Failing to take your full RMD can be costly. The IRS imposes a 25% penalty on any amount not withdrawn as required, though it can be reduced to 10% if corrected promptly.

Each tax-deferred account has its own RMD. For married couples, both spouses must take RMDs from their respective accounts, one spouse’s withdrawal cannot cover the other’s requirement. However, individuals with multiple IRAs can take their total RMD amount from any combination of those IRAs.

RMDs from employer-sponsored plans like 401(k)s, however, must be calculated and taken separately from each account.

What if I inherited an IRA account?

RMD rules work differently when a retirement account is inherited. If you inherit an IRA from someone other than your spouse who passed away in 2020 or later, the SECURE Act generally requires that the entire balance be withdrawn within 10 years of the original owner’s death. This “10-year rule” applies to most non-spouse beneficiaries and can create significant tax implications if not planned for carefully.

For IRAs inherited before 2020, non-spouse beneficiaries may still be eligible to “stretch” distributions over their own life expectancy, an option that can help spread out taxes over a longer period.

Spousal beneficiaries have greater flexibility. A surviving spouse can treat the account as their own, roll it into their existing IRA, or delay distributions depending on their age and the deceased spouse’s age. Choosing the right approach can help minimize taxes and better align distributions with long-term financial goals.

The same general rules apply to inherited Roth IRAs, with one key difference being that distributions are tax-free. Because of this, some individuals who don’t need the extra income from their tax-deferred IRAs may consider Roth conversions as a legacy planning strategy, helping to pass tax-free assets to future generations.

What If You Don’t Need the Extra Income?

If you don’t need your RMD for living expenses, consider a Qualified Charitable Distribution (QCD). Starting at age 70½, you can donate up to $108,000 per year (increasing to $115,000 in 2026) directly from your IRA to a qualified charity. This amount counts toward your RMD but is excluded from taxable income.

While a QCD isn’t a tax deduction, it can help lower your Medicare Part B and D premiums by reducing your Modified Adjusted Gross Income (MAGI). Since Medicare’s IRMAA surcharge for high-income retirees is based on a two-year income lookback, managing your taxable income through RMD and QCD strategies can have lasting benefits.

How to Reduce Future RMDs

If you’re not yet required to take RMDs or are taking them but want to reduce their future amounts, consider Roth conversions. While the converted amount is taxable in the year of conversion, Roth IRA accounts are not subject to RMDs and any withdrawals are tax-free.

Timing these conversions strategically can make a big difference. For instance, if you retire at 65, the years between retirement and the start of RMDs (or Social Security) can be an ideal window to perform Roth conversions while your income, and tax rate, may be lower. This approach helps manage lifetime tax exposure and provides greater flexibility later in retirement.

At TritonPoint Wealth, our team works closely with clients to stay ahead of RMD deadlines, minimize taxes, and design distribution strategies that align with their long-term objectives. Thoughtful preparation not only prevents costly penalties, it ensures that your retirement assets continue to serve your goals well into the future.

If you’re approaching RMD age or simply want to confirm your strategy is on track, our advisors can help you create a customized plan for tax-smart distributions and sustainable income in retirement.