Required Minimum Distributions (RMDs) can impact taxes, Medicare, and legacy planning. Learn strategies high-net-worth retirees can use to navigate them effectively.
Required Minimum Distributions (RMDs) are mandatory withdrawals from certain retirement accounts, starting at a specified age. While they’re a legal requirement, they also present a planning opportunity, especially for high-net-worth retirees.
Large RMDs can push taxable income higher, potentially increasing Medicare premiums (IRMAA), reducing favorable tax treatment on capital gains, and leading to higher taxation on Social Security benefits. But with proactive retirement planning, retirees can structure their RMDs to align more closely with their broader financial, charitable, and legacy goals.
While the strategies below can be effective under the right circumstances, they may not be appropriate for every situation. It’s important to consult with an experienced financial advisor to determine what approach makes the most sense for your overall retirement plan.
Here are some ways high-income retirees can manage and plan around RMDs:
The SECURE Act 2.0 updated the ages at which retirees must begin taking Required Minimum Distributions:
These age increases, compared to the previous starting age of 72, provide more time for tax-deferred growth and allow for additional years of income and tax planning before withdrawals become mandatory. This can be particularly useful when considering Roth conversions, charitable giving, or portfolio reallocation strategies.
In some cases, individuals who are still working past their RMD age may delay RMDs from their current employer’s retirement plan, as long as they do not own more than 5% of the company. Business owners who hold more than a 5% stake must begin RMDs at the applicable age, regardless of employment status.
A Roth conversion allows you to move funds from a traditional IRA or 401(k) into a Roth IRA, paying taxes on the amount converted now to reduce taxable income later. Since Roth IRAs are not subject to RMDs during the original owner’s lifetime, converting funds before your RMD start date can help lower your future RMD obligations.
For high-income individuals, this strategy may be most effective during lower-income years (e.g., between retirement and the RMD start age) or when phased retirement creates flexibility. It’s important to model the tax impact of conversions carefully to avoid unintentionally pushing yourself into a higher tax bracket.
Once you reach age 70½, you can make Qualified Charitable Distributions of up to $115,000 per year (2026 limit) directly from your IRA to eligible charities. These distributions can count toward your RMD while also reducing your taxable income.
This approach is particularly useful for retirees who are already charitably inclined and do not need the RMD income for personal use. QCDs can also help reduce exposure to Medicare IRMAA surcharges and other tax consequences tied to adjusted gross income because they are an above-the-line deduction.
A Qualified Longevity Annuity Contract (QLAC) is a deferred income annuity purchased within a traditional retirement account that allows you to postpone RMDs on the amount used to buy the annuity. In 2026, the maximum allowable QLAC purchase is $210,000.
QLACs can be appealing to retirees who want to reduce RMD amounts in their 70s while securing a future income stream starting as late as age 85. This strategy may suit individuals who expect to live longer or who have other sources of income in early retirement and prefer to delay IRA withdrawals.
While the IRS doesn’t require how or when within the year RMDs are taken, the method can have planning implications. Taking RMDs monthly can help manage market volatility and distribute tax liability more evenly throughout the year. It may also support consistent cash flow for households that rely on portfolio withdrawals for living expenses.
On the other hand, lump-sum withdrawals offer simplicity and may be preferred by those coordinating tax payments or managing distributions across multiple accounts.
Some retirees find value in using a hybrid method, taking smaller amounts throughout the year while leaving flexibility for year-end tax adjustments.
One of the challenges with RMDs is the potential for large withdrawals to push retirees into higher income tax brackets or trigger additional Medicare costs. Income smoothing involves strategically withdrawing funds from various accounts—taxable, tax-deferred, and Roth—over time to avoid steep increases in taxable income in any single year.
This strategy may include drawing from tax-deferred retirement accounts more heavily in early retirement, drawing from taxable accounts while performing Roth conversions in early retirement, or drawing from taxable or Roth accounts for surplus cash flow needs once RMDs have started and have been taken.
Reviewing projected income annually can help identify opportunities to spread taxable income more evenly and manage exposure to phaseouts, surcharges, and capital gains thresholds.
RMDs require the sale or distribution of investments, but retirees can use that to their advantage. By taking RMDs from overweighted or overperforming assets, you can help bring your portfolio back in line with your target allocation.
For example, if equities have significantly outpaced fixed income holdings, you might choose to withdraw from equity positions to reduce risk and maintain balance. Proceeds that aren’t needed for spending can be reinvested in a taxable account in a way that supports your long-term investment plan.
For individuals with multigenerational wealth goals, RMDs are also a key piece of legacy planning. Inherited IRAs are now subject to the 10-year distribution rule, meaning most beneficiaries must fully distribute the account within 10 years of the original owner’s death. Annual RMDs may still be required if the original owner had already begun taking them.
While Roth IRAs are not subject to RMDs during the account holder’s lifetime, inherited Roths must be fully distributed within 10 years as well. Incorporating trusts, gifting strategies, or beneficiary planning can help shape how and when wealth is passed on, particularly if heirs may face higher taxes or aren’t prepared to manage large distributions.
RMDs are more than just a withdrawal requirement. When structured carefully, they can support tax efficiency, charitable goals, income flexibility, and legacy strategies.
Working with a financial planning advisor at EP Wealth can help you assess how RMDs fit into your overall retirement plan, model different approaches, and evaluate opportunities to reduce unintended tax consequences. Reviewing your strategy each year is key as both markets and regulations continue to evolve.
Contact an EP Wealth Advisor to learn more.
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