Required minimum distributions (RMDs) stack on top of Social Security and any pension. The share you must withdraw rises every year, so a big traditional IRA or 401(k) can move you up a tax bracket in your 70s. Use the lower-income years before your first RMD to draw it down at lower rates.
The IRS sets each RMD by dividing the account’s balance at the end of the prior year by a life-expectancy factor that shrinks as you age. On a $1 million IRA, that’s about $37,700 of taxable income at 73, and if the balance holds steady, $62,500 at 85.
That income can lift you from the 12% bracket into the 22% bracket, make up to 85% of your Social Security benefits taxable, and trigger the income-based surcharges on Medicare Part B and Part D premiums. Delaying your first RMD to April 1 of the following year makes it worse, because you then take two in one tax year.
Between retirement and your first RMD (age 73, or 75 for anyone born in 1960 or later), your taxable income is often the lowest it will ever be. Each year in that window, move money out of the traditional account up to the top of your current bracket, as a Roth conversion or as withdrawals you live on while you delay Social Security. You pay tax at today’s rate, not the higher one RMDs would bring, and Roth IRAs carry no RMDs while you’re alive. Like an RMD, that income can make more of your Social Security taxable and, from 63, raise your Medicare premiums two years later. Before 65, it can also cut or end an Affordable Care Act subsidy. Stop before those costs exceed the tax you save.
Estimate your balance at RMD age, divide by the IRS factor for that age (26.5 at 73), and add Social Security, pensions, and any other income. If the total lands in a higher bracket than you’re in now, convert or withdraw enough each year to bring that projected total down into your current bracket.
From age 70½, a qualified charitable distribution sends IRA money straight to a charity, though not to a donor-advised fund. It counts toward your RMD and never enters your adjusted gross income, the figure that drives Social Security taxation and Medicare surcharges.
Run those numbers in your early 60s, while the low-bracket years are still ahead of you.
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