RMDs Got a Makeover. Your Retirement Tax Plan Should Too.
With SECURE Act 2.0 changing the RMD timeline, many pre-retirees and new retirees now have a longer runway before required withdrawals begin. That extra time can be valuable, but it can also concentrate taxable income later. A few common-sense adjustments now can help you avoid unpleasant surprises later.
How do taxes have an impact on retirement?
Let’s say you have one dollar. And let’s say you were able to double that dollar every year for twenty years. If you didn’t have to pay any taxes on the money, how much would you have at the end of that period? Answer: $1,048,576
Now, let’s say you have that exact same scenario, however, you had to pay 15% taxes. How much would you have at the end of that 20-year period? Answer: $220,513
Do you know what tax bracket you are in? Chances are it’s more like 25% and not 15%. If so, you would have $72,570 at the end of that 20-year period.
In summary:
Taxable at 25% = $72, 570
Taxable at 15% = $220,513
Tax Free at 0% = $1,048,576
If you’re a pre-retiree or newly retired, here’s the not-so-fun truth: taxes often take more of your lifetime savings than people expect. RMDs are one of the biggest reasons. If you start early enough, you may even be able to enjoy a tax-free retirement! You can learn more about that here.
SECURE Act 2.0 changed the timing of required minimum distributions (RMDs). That sounds like good news—because it can be. But the “delay” can also set you up for larger forced withdrawals later, which can mean higher taxes and less flexibility at the exact time you want more control.
What changed under SECURE Act 2.0
The starting age for RMDs moved:
- Age 73 for people born 1951–1959
- Age 75 for people born 1960 or later
So yes—you may have more time before RMDs kick in. But that extra time can also allow your tax-deferred accounts (traditional IRAs and 401(k)s) to grow larger. And larger accounts often lead to… you guessed it… larger taxable RMDs.
Why “later RMDs” can backfire
When RMDs start later, the withdrawals can be more concentrated. That can create income spikes that ripple through your entire plan.
Here’s what those spikes can affect:
- Your tax bracket (obviously)
- How much of your Social Security becomes taxable
- Medicare premium surcharges (IRMAA) if income crosses certain thresholds
- Your ability to do tax-smart moves later because the “room” in lower brackets is gone
In plain English: delaying RMDs can feel like postponing a bill… only to get a bigger bill later.
Why this matters even more heading into 2026
After a strong market stretch, many retirees are entering 2026 with retirement account balances that are meaningfully higher than they expected a few years ago.
That’s great—until the IRS starts forcing larger withdrawals. Remember, tax-deferred really means tax-delayed – at who knows what brackets will be in place when the time comes.
A simple example shows the idea:
- A $1,000,000 retirement account at the end of 2023
- Earning 15% annually (hypothetical) and taking required withdrawals along the way
- Could grow to roughly $1.33 million by the end of 2025
Now here’s the part people miss: the RMD isn’t growing a little — it can grow a lot! In your example, it jumps from roughly $40,650 to $60,748 over that period.
And that’s just one $1M account. Plenty of households have multiple accounts, plus pensions, plus Social Security.
That’s how taxes quietly become one of the biggest “expenses” in retirement.
The real goal of RMD planning
A lot of people treat RMD planning like a math problem: “What’s the minimum I have to take?”
That’s step one. But it’s not the strategy. ‘Minimum’ probably shouldn’t be your focus.
Good RMD planning is about shaping taxable income over time—so you don’t create big spikes later that lead to higher taxes and higher Medicare costs.
Or said another way: it’s not about how long you can avoid withdrawals. It’s about avoiding the retirement version of a triple-bogey that can ruin the entire 18-hole score: one big year that creates damage across multiple areas and for life!
Common-sense ways to reduce future RMD pain
The best solutions aren’t flashy. They’re mostly about timing and coordination.
Some examples that often help (depending on your situation):
- Roth conversions in lower-income years (partial, staged, intentional—not “all in”)
- Using taxable accounts earlier in retirement to reduce future tax-deferred balances
- Coordinating withdrawals across account types (taxable / tax-deferred / Roth) so income stays steadier
- Planning around Social Security and pensions so RMDs don’t pile on top
Done right, these steps can reduce future RMDs and smooth out taxes over your retirement years—usually the difference between “manageable” and “why is my tax bill doing that?”
Pro tip; RMD planning is not about delaying distributions as long as possible.
It’s about preventing taxable-income spikes that trigger higher taxes (including on Social Security) and Medicare surcharges.
You don’t need hero shots. You need fewer unforced errors.
So, taxes matter.
The amazing thing about it is that virtually anyone, if they begin early enough, can strategize a tax-free retirement.
There’s information about this, as well as a lot of other topics, in my monthly newsletter. And, new subscribers will receive a copy of 4 Steps to a Tax Free Retirement. There’s no obligation, of course – no one will be calling you – and you can cancel at any time. You can get your copy by subscribing here.
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