Required minimum distribution season sneaks up on many retirees. RMDs are the amounts you must withdraw from tax‑deferred retirement accounts once you reach the required age, which is 73 for individuals born from 1951 through 1959 and 75 for those born after 1960. Failing to take an RMD can be an expensive mistake. Vanguard research estimates that missed RMDs cost investors as much as $1.7 billion a year, and most of that loss is avoidable with better organization and planning.Every year, millions of people log into their IRA, withdraw the smallest amount required and move on. The RMD becomes a chore to complete before December 31. This approach misses the point. An RMD is one of the most important annual decisions in retirement planning. How you handle it can influence your: TaxesMedicare premiumsCharitable givingInvestment allocationIt can also affect the legacy you leave to heirs.The question is not how to merely satisfy the RMD requirement, but how this year’s distribution should fit into your spending, tax strategy, charitable goals and estate plan.About Adviser IntelThe author of this article is a participant in Kiplinger’s Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.Get organized, then get clear on what you need One of the biggest challenges with RMDs has nothing to do with taxes. It is simply tracking down every account and calculating what you owe, which turns into a headache when your savings are scattered across several institutions. If you are approaching retirement, consolidate your retirement accounts wherever possible. Fewer accounts require a simpler calculation, and a simpler calculation means fewer costly mistakes.Once your accounts are in order, determine how much money you actually need from your IRA. If the full RMD covers your living expenses, the decision is straightforward. If it does not, the RMD becomes a spending plan waiting to be written, one that can support charitable giving, fund a Roth conversion, get reinvested or build a cash cushion. That shift — treating the RMD as a cash flow event rather than an automatic spending requirement — unlocks everything that follows.Let charitable intent drive a QCD and watch your AGIA qualified charitable distribution, or QCD, lets anyone who is 70½ or older send money directly from a traditional IRA to a qualified charity, excluding it from taxable income entirely. For 2026, the limit is $111,000 per person, and each spouse with their own IRA gets a separate limit.The temptation is to treat this purely as a tax trick. Resist that. Start instead with a simple question: How much were you already planning to give to charity this year? If the answer is $25,000, a QCD is simply the most efficient way to move money you were donating anyway.Here is where the strategy gets powerful. Picture a 75-year-old with a $1.5 million traditional IRA and a $60,000 RMD. She needs only $20,000 for living expenses and already gives $25,000 a year to charity. Instead of taking the full $60,000 as taxable income and separately writing a $25,000 check, she can direct $25,000 straight from the IRA to charity through a QCD. That portion never touches her tax return. The remaining $35,000 comes to her as a normal distribution. Same total withdrawal, same charitable gift, considerably less taxable income.The reason this matters goes beyond the tax bracket. Most people fixate on their marginal rate and stop there, but a QCD reduces adjusted gross income (AGI) directly, and AGI quietly drives a lot of other costs in retirement. A higher AGI can trigger Medicare IRMAA surcharges, increase the taxable portion of Social Security benefits and push you past thresholds tied to other deductions. Before adding an additional $30,000 or $50,000 to your income, do not just ask what tax bracket that lands in. Ask what it does to your entire financial picture for the year.Time your RMD deliberatelyThere is a common instinct to take the RMD in January and be done with it. Unless you need the cash immediately, there is usually no advantage to rushing. Waiting lets the year’s full tax picture come into focus first, including income, charitable plans and whether a Roth conversion makes sense.The RMD portion itself cannot be converted to a Roth IRA, but you can take the required distribution first and then, separately, convert an additional amount if your bracket allows it. The real annual question becomes a combination of: How much goes out as the RMD?How much becomes a QCD?How much room remains for a Roth conversion?Getting that mix right, year after year, is where real tax savings accumulate.Also, remember that any amount withdrawn beyond your RMD does not carry over to reduce next year’s requirement, since every year resets on its own. Extra distributions should have a clear purpose, whether that is a large expense, a gift or a Roth conversion, rather than being taken casually on the assumption they will count later.Timing extends to the assets themselves, not just the calendar. When it is time to raise the cash, do not simply sell whatever happens to be sitting there. Look at the full portfolio first. If stocks have run up and your allocation has drifted more aggressive than intended, the RMD is a natural chance to trim appreciated positions, generate the required cash and rebalance at the same time, turning a required withdrawal into a disciplined investment decision instead of an afterthought.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Think beyond this year For retirees with substantial IRAs and genuine charitable interests, QCDs can become part of a longer-term legacy strategy. IRA assets left to heirs are generally taxed as ordinary income when withdrawn, while assets given to charity through a QCD are not taxed at all. Directing a portion of the IRA to charity during your lifetime, rather than leaving the whole balance to be taxed later, accomplishes the same charitable goal more efficiently than doing it through your estate. And by drawing down the IRA instead of a taxable account, which gets a step up in basis at death, you may leave your noncharitable heirs better off, too.The retirees who handle this best treat it as an ongoing process rather than a once-a-year fire drill. Early in the year, estimate income, review charitable intentions and identify the right RMD and QCD amounts. Confirm everything is executed well before the December rush and keep simple records of every QCD, including the charity, the date and the amount, since documentation matters for tax reporting.Markets shift, tax laws change and personal goals evolve, so an RMD strategy built once and never revisited will eventually fall out of step with your life. The retirees who get the most value out of this season stop thinking of it as a withdrawal requirement and start treating it as one of the most useful planning conversations they have all year.Related ContentThe 7 RMD Tax Traps Waiting for You in Your 70s — and How to Start Disarming Them in Your 60sGot $2.5 Million Saved for Retirement? Here Are the Huge RMDs You Must Take at 73, 75, 80 and 855 Costly RMD Mistakes That Will Put a Dent in Your Savings (and How Early Planning Can Help)Good Job on Cutting Costly Investment Fees, But These 8 Tax Traps Can Hurt Far MoreFive Keys to Retirement Happiness That Have Nothing to Do With MoneySecurities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. ParkBridge Wealth Management is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures.This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
How to Turn Your RMD Into a Smart Tax Strategy
