Required Minimum Distribution (RMD) Series: Tax Strategies

March 18, 2021

If you have tax-deferred retirement accounts, managing your annual Required Minimum Distribution (RMD) is a critical part of your financial plan. Below are several strategies you can use to minimize the taxes on your RMD.

When should I take my first RMD?

Well, that depends.

Your first RMD is unique in that it must be taken by April 1st of the year after you turn 72. Determining the timing of your first Required Minimum Distribution (RMD) is one of the first strategic decisions you will need to make. Considering your income from other sources:

  • Will taking your RMD in the same year you turn 72 push you into a higher tax bracket and subject you to higher Medicare premiums?
  • Will delaying the first withdrawal until the following year and essentially doubling up RMDs push you into a higher tax bracket?

Comparing these two strategies with a financial professional could easily save you money on taxes and income-based Medicare premiums.

Can my RMD be waived if I am still working?

Yes; in your current employer-sponsored retirement account.

No; in other types of retirement accounts.

If you are still working when you turn 72, as long as you don’t own 5% or more of your company, you will not be required to take RMDs from your current employer-sponsored retirement account. While you are still subject to RMDs on your personal IRAs, 401(k)s with previous employers, and other tax-deferred accounts, in many cases you can roll these savings into your company plan and avoid taking RMDs until you retire.

How can Roth conversions reduce my future RMDs?

Since, under current law, Roth IRAs are not subject to RMDs, converting your Traditional IRA savings to Roth may be a good way to avoid future tax increases. While you will owe taxes on the conversion, you can control how much you convert per year to keep your taxable income within reason. Spreading the conversions out over several years can prevent your income from pushing into a higher tax bracket.

Plus, Roth IRA distributions do not affect the tax on your Social Security benefits or Medicare premiums, whereas Traditional IRA distributions do. As long as you are at least 59½ and have owned the Roth IRA for at least 5 years, the money saved in your Roth IRA can be withdrawn without increasing your taxable income.

Can I use my RMD to make a charitable contribution?


A distribution from an IRA that is donated to charity is called a Qualified Charitable Distribution (QCD) and is not taxed as income. If you are subject to RMDs, this is a great way to satisfy the distribution requirement without increasing your tax bill. However, QCDs are not eligible to claim as a deduction if you itemize your tax deductions.

For more information about your RMD options, please reach out to a Dean advisor. For over 50 years, C.H. Dean has been guiding clients and developing personalized strategies that leverage RMDs to help clients achieve their financial goals. We are ready to discuss strategies that will enable you to live the life you envision.