RMDs are mandatory annual withdrawals from traditional IRAs and 401(k)s that begin at age 73. Failing to take them triggers a significant IRS penalty, and ignoring them can push you into higher tax brackets unexpectedly.
Discuss Your RMD Strategy with SassonA Required Minimum Distribution (RMD) is the minimum amount the IRS requires you to withdraw annually from traditional IRAs, 401(k)s, 403(b)s, and most other tax-deferred retirement accounts beginning at age 73 (as of the SECURE 2.0 Act, effective 2023). The withdrawal amount is calculated each year based on your account balance and life expectancy factor from the IRS Uniform Lifetime Table. Roth IRAs do not have RMDs during the owner's lifetime.
The IRS uses a simple formula: your prior December 31st account balance divided by a life expectancy factor from the IRS Uniform Lifetime Table. The factor decreases each year as you age, meaning RMDs grow as a percentage of your account balance over time.
Example: A 73-year-old with a traditional IRA balance of $500,000 on December 31 of the prior year. The IRS Uniform Lifetime Table factor for age 73 is 26.5.
Note that as the factor decreases with age, the required withdrawal as a percentage of your balance increases. For a growing account, RMDs can become very large, potentially pushing you into higher tax brackets and triggering IRMAA Medicare premium surcharges.
Multiple accounts: If you have multiple traditional IRAs, calculate the RMD for each separately, but you can withdraw the total from any one or combination of your IRAs. For 401(k) plans, each plan's RMD must generally be taken from that plan specifically.
RMDs are not just a compliance requirement, they are a tax planning event that affects multiple aspects of your retirement finances simultaneously.
RMDs are taxed as ordinary income and add directly to your Adjusted Gross Income (AGI). A retiree with $60,000 in pension and Social Security income who also has a $30,000 RMD now has $90,000 in taxable income, potentially pushing portions of that income into a higher federal bracket. Without planning, RMDs can significantly increase your effective tax rate in retirement.
Medicare Part B and Part D premiums increase for higher-income retirees through the Income-Related Monthly Adjustment Amount (IRMAA). In 2025, IRMAA surcharges begin when MAGI exceeds $106,000 (individual) or $212,000 (married). Large RMDs can push you into IRMAA tiers, potentially adding $300–$600+ per month in Medicare premium surcharges. IRMAA is determined 2 years in arrears, so a large RMD this year affects Medicare costs in 2 years.
Up to 85% of Social Security benefits can be subject to federal income tax when combined income (provisional income) exceeds certain thresholds. RMDs add to provisional income, potentially causing more of your Social Security benefit to become taxable. This creates a "tax torpedo" effect where each additional dollar of RMD triggers both ordinary income tax and additional Social Security taxation.
A large traditional IRA that generates substantial RMDs during your lifetime, but still passes a large balance to heirs, creates a significant tax burden for those heirs, who must deplete the inherited IRA within 10 years (under SECURE 2.0) and pay ordinary income tax on every withdrawal. Proactive Roth conversions before death convert taxable inheritance into tax-free inheritance.
The most powerful proactive strategy is converting traditional IRA balances to Roth IRA before RMDs begin, specifically during the early retirement window between stopping work and when both Social Security and RMDs start. By reducing your traditional IRA balance in lower-tax years, you reduce the size of future mandatory distributions.
For Nevada residents, this strategy is uniquely valuable: Roth conversions in Nevada incur only federal income tax, no state income tax. This makes the conversion economics more favorable than in California, Oregon, or New York, where state income tax adds to the conversion cost.
Learn more about Roth conversions →A Qualified Charitable Distribution allows taxpayers age 70½ or older to transfer up to $105,000 per year (2025 limit) directly from a traditional IRA to a qualified charity. The QCD:
For Nevada retirees who are charitably inclined and would otherwise donate to charity from after-tax income, routing the donation through a QCD provides a federal tax savings that the standard charitable deduction may not deliver (particularly for standard deduction filers).
Nevada has no state income tax, which means RMD income is taxed only at the federal level. For California retirees, the same RMD would face up to 13.3% California state income tax in addition to federal taxes. For Nevada residents, the entire focus of RMD planning is on federal tax optimization.
The absence of state income tax also means that strategic Roth conversions in Nevada, executed specifically to reduce future RMDs, carry only the federal income tax cost. This is one of the most compelling planning opportunities available to Nevada retirees with large traditional IRA balances.
You cannot eliminate RMDs from existing traditional IRAs entirely, once you reach age 73, the IRS requires annual withdrawals. However, you can significantly reduce future RMDs through proactive Roth conversions before age 73: converting traditional IRA money to Roth reduces the traditional IRA balance and therefore reduces future RMD amounts. Roth IRAs themselves have no RMDs at all during the owner's lifetime.
For current-year RMDs, Qualified Charitable Distributions (QCDs) satisfy the RMD requirement and exclude the distributed amount from your taxable income, effectively making the RMD tax-free if you were going to donate that money to charity anyway. And if you are still working at 73, you may be able to delay RMDs from your current employer's 401(k) plan, though not from IRAs.
Missing an RMD triggers an IRS excise tax of 25% of the amount that was not withdrawn (reduced from 50% by the SECURE 2.0 Act). On a $20,000 missed RMD, that is a $5,000 penalty. If the error is corrected within 2 years, the penalty drops further to 10%.
The IRS does have a process for requesting a penalty waiver when the failure was due to reasonable error and corrective action is taken promptly. However, the safest approach is simply to set a calendar reminder: RMDs must generally be taken by December 31st each year. Your first RMD (for the year you turn 73) may be delayed until April 1 of the following year, but taking two RMDs in a single year doubles the taxable income for that year, which is usually not optimal. Taking the first RMD in the year you turn 73 avoids this issue.
Roth IRAs do not have required minimum distributions during the original owner's lifetime. This is one of the most powerful features of the Roth IRA, your money can continue growing tax-free indefinitely without any forced withdrawals. Roth 401(k)s also lost their RMD requirement beginning in 2024 under the SECURE 2.0 Act.
However, non-spouse beneficiaries who inherit a Roth IRA must generally deplete the inherited account within 10 years under SECURE 2.0 rules, though those distributions are still income-tax-free, which makes Roth IRAs outstanding wealth transfer vehicles. A spouse who inherits a Roth IRA can treat it as their own and maintains the lifetime no-RMD benefit.
Nevada's 0% state income tax means that RMD income is subject only to federal income tax, not state tax. This is a meaningful advantage over states like California (up to 13.3%), Oregon (up to 9.9%), or New York (up to 10.9%), where the same RMD would face both federal and state income taxes.
For Nevada residents, this means the focus of RMD management is entirely on federal tax optimization: managing AGI to avoid IRMAA surcharges, staying below Social Security taxation thresholds, and executing Roth conversions efficiently. Nevada's absence of state income tax also makes Roth conversions, the primary tool for reducing future RMDs, more economical, since there is no state tax cost on the conversion amount. Every dollar you convert from traditional IRA to Roth incurs only federal income tax in Nevada vs. federal + state in high-tax states.
Six steps to manage Required Minimum Distributions without unnecessary taxes.
RMDs can significantly affect your federal tax bracket, Medicare premiums, and Social Security taxation in retirement. Sasson Emambakhsh (NV #4185790 | AZ #22097825) helps Nevada households build proactive RMD management plans, including Roth conversion strategies, QCD planning, and tax-efficient withdrawal sequencing, at no cost and with no obligation.
Schedule Your Free RMD Planning Consultation (702) 734-4438