The IRS does not ask a 73-year-old with $500,000 in a traditional Individual Retirement Account (IRA) whether they need the money before enforcing a withdrawal this year.
Under the required minimum distribution (RMD) rules, that retiree must pull out a fixed share of the balance each year, and every dollar counts as ordinary income.
The tax bill on the distribution itself is only the first cost. The withdrawal also affects Social Security taxation and Medicare premiums through calculations that operate on lookback rules, Charles Schwab confirmed.
How the $18,868 forced withdrawal compounds a retiree’s tax bill
The IRS divides the prior year-end IRA balance by a factor from the Uniform Lifetime Table it publishes.
At age 73, the factor is 26.5, so a $500,000 balance produces an $18,868 withdrawal that must clear the account before the calendar year ends.
By age 75, the divisor drops to 24.6, meaning the same balance would require roughly $20,325 as the life expectancy factor shrinks with age.
A joint-filing couple collecting $40,000 in combined Social Security benefits alongside $15,000 in pension income faces the arithmetic directly.
The Social Security Administration calculates “combined income” by adding adjusted gross income, nontaxable interest, and half of the annual benefit amount.
Without the RMD, their combined income is $35,000, the $15,000 pension plus $20,000, which is half of the couple’s Social Security. That figure falls below the $44,000 joint-filer threshold where up to 85% of benefits become taxable.
Add the $18,868 distribution, and combined income jumps to $53,868.
The couple crosses the $44,000 line, and under the IRS’s two-tier formula, roughly $14,400 of their $40,000 in Social Security benefits becomes subject to federal income tax, income that would have remained untaxed without the RMD.
The RMD itself is taxable, and it drags a second income source into taxation alongside it.
Medicare surcharges tied to income from two years before
Medicare applies a surcharge called the income-related monthly adjustment amount, or IRMAA, to Part B and Part D premiums for beneficiaries above certain income levels.
The first IRMAA tier in 2026 starts at $218,000 in modified adjusted gross income for married couples filing jointly and $109,000 for individuals filing alone.
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The standard Part B premium in 2026 is $202.90 per month, but crossing the first IRMAA threshold pushes the total to $284.10, according to the Centers for Medicare and Medicaid Services.
IRMAA is difficult to plan around because of a two-year lookback, as 2026 premiums are calculated from the 2024 tax return.
A required minimum distribution from 2024 that pushed income past the threshold will only show up as a surcharge on 2026 Medicare bills.
Medicare surcharges can hit retirees two years later when earlier income, including RMDs, pushes them above IRMAA thresholds.Halfpoint Images / Getty Images
Roth conversions before 73 shrink the balance the IRS can force out
Converting traditional IRA funds to a Roth account during lower-income years between retirement and age 73 shrinks the balance that the IRS can target, according to research from the Schwab Center for Financial Research.
Ed Slott, a CPA and author of “The Retirement Savings Time Bomb Ticks Louder,” told ThinkAdvisor in a 2024 email exchange that financial professionals who overlook the growing tax liability inside tax-deferred accounts are failing their clients.
<strong>It would almost be malpractice for any financial or tax advisor to ignore the coming tax storm</strong>.
The gap between retirement and the start of mandatory withdrawals is the only window when income remains fully within a retiree’s control.
Once the IRS begins requiring distributions, the income is locked in, and the range of strategies for managing the tax impact narrows each year.
Fidelity highlights one distribution that stays out of adjusted gross income
A qualified charitable distribution sends IRA funds directly to a qualifying charity and satisfies a required minimum distribution without increasing adjusted gross income.
Under IRS rules, IRA owners must be at least 70½ to use the option, and the 2026 annual limit is $111,000 per individual after an inflation adjustment set by IRS Notice 2025-67.
The distinction from a regular cash donation matters for retirees near an IRMAA threshold or at risk of higher Social Security taxation.
A standard donation after taking a distribution still counts as taxable income on the return, even if the retiree itemizes and claims a charitable deduction.
What retirees approaching their first RMD at 73 still need to weigh
The Schwab Center for Financial Research recommends that retirees review Social Security, pensions, and tax-deferred balances before entering their first RMD year.
Fidelity says that retirees should discuss the qualified charitable distribution with a tax adviser before their first RMD deadline. The firm says retirees should consider raising the option with a tax adviser before their first RMD deadline.
The One Big Beautiful Bill Act strengthened the QCD case in 2026. Under the law, itemizers lose the deduction on the first 0.5% of AGI in charitable gifts. A QCD bypasses the floor because it is excluded from AGI, not claimed as an itemized deduction.
The IRS sets the withdrawal, but retirees still control how much other income sits on the return when it arrives, and that window narrows each year.
Related: Rolling your 401k into an IRA could cost you more than you think