By Brion Harris
As a financial advisor at Premier Planning Group, I spend my time building retirement plans that mirror the decades of hard work my clients have put in. As you approach or enter your 70s, one of the most important milestones we address together is the transition into required minimum distributions, commonly referred to as RMDs.
I know the idea of being required to withdraw from your savings can feel intrusive or confusing. However, RMDs don’t have to be a source of stress. When managed with a clear plan, they shift from a mandatory obligation to a strategic tool. They offer a unique opportunity to coordinate your retirement income and manage your tax exposure effectively.
Let’s cut through the myths surrounding RMDs and look at how they fit into your specific financial picture. Our goal is to keep your retirement as fulfilling and well-organized as you’ve always envisioned.
What Are Required Minimum Distributions?
Let’s start with a simple definition.
The IRS defines required minimum distributions as the minimal amount you must begin taking out of your retirement funds after you turn 73. (Note: Under the SECURE 2.0 Act, that RMD age will rise to 75 in 2033.)
IRAs
401(k)s
457 plans
403(b)s
SEP IRAs
SIMPLE plans
Since Roth IRAs are funded with after-tax money, they are the only account type exempt from RMDs. You must, however, withdraw funds from other types of Roth account types, like Roth 401(k)s.
How Much Do I Have to Withdraw?
Both your average life expectancy (as calculated by the IRS) and the total money in your account on December 31st of the previous year determines how much you’re required to withdraw.
Four Things You Need to Know About RMDs
This article isn’t intended as an all-encompassing discussion of RMDs, but there are four core rules you need to know:
1. RMDs Must Be Taken by December 31st of Every Year
To avoid a penalty, you are required to take your annual RMD before December 31st of each year. If you miss this deadline, you have to pay a substantial 25% tax on the money you should have taken out.
2. You Must Take Your First RMD by April 1
Even though annual RMDs are due on December 31st, you can postpone your first RMD until April 1st of the next year. For example, if you turned 73 in 2026, you could postpone your first distribution until April 1, 2027.
However, waiting this long could potentially push you into a higher tax bracket. That’s because you would be taking two distributions during one year. So calculate exactly when it makes sense for you to take your first RMD.
3. You Could Defer RMDs if You’re Still Employed
The “still working” rule for 401(k)s exempts 73-year-olds who are not yet retired from taking RMDs.
Of course, there are exceptions:
Only RMDs for your current employer-sponsored plan can be postponed.
You must take withdrawals from any 401(k)s or IRAs you may have from prior workplaces.
4. You Can Reduce Your Taxes By Redirecting Your RMD to Charity
One excellent approach to give back and lessen your tax burden is to donate your RMD to a worthy cause. The tax code’s permanent inclusion of qualified charitable distributions (QCDs) in 2016 allowed RMD gifts to be excluded from taxable income on your tax return.
For example, that means you won’t be required to pay taxes in a given year if your RMD is $3,000 and you donate $3,000 to charity.
Remember, though, that not every retirement account is eligible to use its funds as a QCD. The retirement account has to be an IRA that is a traditional, rollover, inherited, inactive SEP, or inactive SIMPLE plan.
A SEP or SIMPLE is deemed dormant if no employer contribution has been made during the plan year that ends during the tax year in which the charitable contribution is made.
Let’s Turn RMD Requirements Into a Retirement Opportunity
Required minimum distributions often bring more questions than answers, but once you understand the rules, you can move from simply following a requirement to strategically managing your retirement.
At Premier Planning Group, we help families navigate these complexities so they can turn a mandatory obligation into a clear financial opportunity. We’re here to provide the guidance you need to make the right moves at the right time. Call our office at (443) 837-2520 or email my executive assistant, Talia Grover, at taliagrover@premierplanninggroup.com to set up a complimentary consultation.
About Brion
Brion Harris is the CEO and founder of Premier Planning Group, where he leverages over 20 years of experience to help retirees and pre-retirees create customized wealth preservation and distribution strategies. An eight-time recipient of the #1 Advisor Leadership Award* at Summit Brokerage Services, he is known for simplifying complex finances and building long-lasting, service-driven relationships. A longtime Annapolis resident, Brion enjoys boating and traveling with his wife and three children when he isn't helping clients navigate their financial futures.
*The #1 Advisor and Leadership Award is based on production data while at Summit Brokerage Services, Inc. Brion Harris received the award in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021. This award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client.