You may hear the term “RMD” and think, “Just another rule I have to follow.” But Required Minimum Distributions (RMDs) are more than a check-box. They impact your taxes, your giving, and even how you pass on your legacy.
What Are RMDs and When Do They Start?
RMDs are amounts the IRS requires you to withdraw each year from certain retirement accounts. You don’t get to leave all your money invested forever.
- As of 2025, you must begin taking RMDs when you reach age 73. (That rule came from the SECURE 2.0 Act.)
- Your first RMD is due by April 1 of the year after you hit 73. Later RMDs must be done by December 31 each year.
- These rules apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, and many employer retirement plans (like 401(k)s). Roth IRAs are exempt while you’re alive.
- If you don’t take your RMD, there can be a steep penalty — generally 25% of the amount missed. If you correct the mistake in time, the penalty could be lowered to 10%.
So yes — it’s a rule. But it’s also a tool.
The RMD Tax Implications Most People Overlook
Because RMDs count as taxable income, they can cause surprising side effects:
- Higher taxable income. An RMD added to your income could push you into a higher tax bracket.
- Impact on Medicare premiums (IRMAA). When your income rises, you may trigger higher Medicare Part B and D surcharges.
- Phaseouts and thresholds. More taxable income can reduce or eliminate deductions or credits and affect how much of your Social Security is taxed.
In short: RMDs can quietly change your tax picture year to year.
How RMDs Fit Into Your Withdrawal Strategy
RMDs don’t act in isolation. They must be woven into your broader withdrawals from all your accounts.
- A common withdrawal order is:
- Taxable accounts first (because you’ve already paid tax on those)
- Tax-deferred accounts (where RMDs live)
- Roth accounts (last, since they grow tax-free)
- But because RMDs are mandatory, they force you to withdraw from your tax-deferred accounts whether you want to or not. That means planning around them is critical.
- Example: Suppose you don’t need the RMD to live your life. You might use it for giving, reinvesting, or shifting assets — rather than consuming it.
- Also: If you have multiple IRAs, you can calculate RMDs separately but take them from one or more of your IRAs. For employer plans like 401(k)s, RMDs generally must be taken from each plan.
What to Do If You Don’t Need My RMD Money
Just because you are required to take RMDs doesn’t mean you have to spend them.
- Qualified Charitable Distributions (QCDs). Starting at age 70½, you can transfer up to $108,000 in 2025 from your IRA directly to a charity. That money counts toward your RMD but is not included in your taxable income.
- Gifting to family. Instead of letting RMD money sit idle, you could use it to gift to children or grandchildren (within gift tax rules).
- Reinvesting in taxable accounts or trusts. Use the RMD money (if not needed) to build legacy or to generate supplemental income outside retirement accounts.
One nuance: Because of the “first-dollars-out” rule, if you take a regular RMD first and then try to make a QCD, your RMD may not be properly offset. It’s wise to do the QCD first, then the remaining RMD.
Using RMDs for Legacy and Philanthropy
RMDs don’t have to be expenses you have to swallow. They can support your values.
- By using a QCD, you can give to your favorite local or national charity without increasing your taxable income.
- Over time, using RMDs for giving can build a philanthropic legacy.
- Example: Suppose your RMD is $20,000 for 2025 and you don’t need it for living costs. You could direct $15,000 via QCD to a hospital or educational scholarship locally, satisfying your RMD and supporting your community.
This way, a rule becomes a meaningful tool — both tax-smart and heart-smart.
Get Your RMD Checklist – Comment RMD Help In Form
RMDs are often viewed as a burden. But when you understand them, they can be a planning lever — for taxes, giving, and legacy. The trick is not just to comply, but to plan.
Comment – RMD Help in the form, and we’ll send you our RMD checklist guide to help you navigate your RMDs.
About the Financial Planning Author
Alexander Langan, J.D, CFBS, serves as the Chief Investment Officer at Langan Financial Group. In this role, he manages investment portfolios, acts as a fiduciary for group retirement plans, and consults with clients regarding their financial goals, risk tolerance, and asset allocation.
With a focus on ERISA Law, Alex graduated cum laude from Widener Commonwealth Law School. He then clerked for the Supreme Court of Pennsylvania and worked in the Legal Office of the Pennsylvania Office of the Budget, where he assisted in directing and advising policy determinations on state and federal tax, administrative law, and contractual issues.
Alex is also passionate about giving back to the community, and has participated in The Foundation of Enhancing Communities’ Emerging Philanthropist Program, volunteers at his church, and serves as a board member of Samara: The Center of Individual & Family Growth. Outside of work and volunteering, Alex enjoys his time with his wife Sarah, and their three children, Rory, Patrick, and Ava.
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