Are You Making this RMD Mistake? 84% Of Retirees Are!

Good morning Erin. This was another good video with a balanced discussion of the issues and aspects involved in this area. For me, I have been retired for 13 years now and since starting with RMDs I have always done the minimum amount. I generally use these funds for the purposes of gifting within the family. As part of my legacy planning, I have been doing Roth conversions to lessen the tax burden on my heirs. So far, I have only taken a witdrawal above the RMD amount once, to build a large 1500 sq ft shop for my son at his house 3 years ago. In a month or so, I may be doing a second distribution, and take an IRMAA hit, to help my daughter purchase a home. Have a good week Erin and I'll see you on the next one. Larry, Central Valley, Ca.

Hi Erin. My wife and I are both 70 this year and planning for the RMD phase of our life three years from now. Our current plan is to take the minimum required amount. We have two reasons for this: 1. You did not mention (and few RMD discussions do) the "Income Related Medicare Adjustment Amount" or IRMAA. While this is not technically a tax, it is deducted from social Security payments of higher income retirees. Taxable RMD's are part of adjusted gross income on our IRS 1040 form and hence become subject to IRMAA assessments by Social Security. As the time gets closer I MAY (or may not) look at taking a larger distribution but staying within the same IRMAA bracket. 2. You make the point that saving a nestegg for some future event in retirement may not be necessary. What you don't talk about is late in life assisted living needs. Depending on the level of care required the monthly cost can be very substantial. Our thought is keeping the IRA accounts in reserve in the event we need to fund such expenses. Additionally, if that were to be the case, our tax bill may be substantially lower if the assisted living expenses qualified as medical deductions. Thanks for the video, these are just my thoughts on the subject. We are fortunate to live the standard of living we like with our pension and social security income and I understand others are in different situartions.

I think for many people, taking the minimum distributions from their tax-deferred retirement accounts is intended to preserve a large tax-deferred balance for the event of large, late-in-life tax-deductible long term care expenses.

I am not yet at the age where RMDs apply but we have already started taking withdrawals from my IRA to put them into my Roth. It is all based upon our family income and the gap to the next tax bracket. We also watch the stock market and try to time the withdrawals to drops in the market so we can move as many shares as possible when we do the withdrawals. Fortunately as I am about 30% into TSLA and it goes down on a regular if unpredictable basis this has worked out for us. 😉

I'm retired and actually look forward to taking RMDs. I plan to donate them to charity and avoid the taxation altogether. This strategy will also free up some monthly cash flow as I'll no longer be donating cash to my charity.

We’ll be starting RMDs in five years. Our Roth conversions have greatly reduced our traditional IRA accounts, but they will still be substantial. We plan to use Qualified Charitable Distributions (QCDs) in lieu of RMDs for our IRAs. We can live off of dividends, interest, social security, a small pension, and capital gains if needed. Our Roth accounts will go to the boys. QCDs are a wonderful option!

Stop calling my inferior investment strategy into question. I'm avoiding tax deferred vehicles (above and beyond employer match) partially to avoid RMDs, but also to give me tools to work with as I approach retirement to reduce my tax burden. It's a long ways off for me, so I don't know the ins and outs, but I do know that if I just dump everything into a 401k, my retirement will be very simple and very expensive once I hit those RMD ages. If I have post tax and tax free accounts with decent balances, I can figure out or hire someone to strategically use the money to minimize my tax liability. Per your advice, though, it seems like I should think more critically about using RMDs as a trigger to start spending my money rather than dying with it.

Retiree couple here a few years before the RMD age kicks in. We are thinking of taking more than the RMD and maybe doing so before the RMD age to fill in the tax bracket we find ourselves in. The excess money can then be used as more cash equivalent buffer for bad investment years or/and added to our investments. This should reduce the portion of our long term money that is in a retirement account and subject to the whims of Congress.

I am a super saver, so I find spending to be difficult. But I am leaning more and more towards gifting my kids while I am living, so taking more than the RMD makes sense. And I get to see them enjoy it while I'm still around 🙂

My wife and I have 500K😮 in IRA accounts. All of the dividend stocks. Because if pensions and Social Security we do not need the money we have in our IRA accounts. So my strategy to satisfy the RMD is to transfer stock from the IRA to a regular brokerage account. Accumulated dividends will take care of the taxes. It may seem like we're trying too hard to hang on to our money. However we want for nothing and we still have money left over each month from the pensions and Social Security.

We are retirees in our late and early 60s. Our strategy is to convert from tax deferred to exempt as much as possible before reaching RMD age 🙄 for legacy purposes. Our return on the convertion will be realized before us passing. If these monies are going to grow, they might as well be in a tax-exempt condition. Our tax deffered monies are only 25% of our net worth. So, they won't be a problem even if we don't convert.

Qualified Charitable Distributions are worth considering as an option to avoid RMD taxation.

Thanks. You’ve inspired me to stop saving (I am 66 and retired) and to start enjoying some of the money I squirreled away. It’s hard to get put of the save for a rainy day mindset.

You are correct Erin. There are many reasons why taking the minimum RMD is intentional and a good move. In my case, I plan to leave a sizable legacy to my son and prefer to let the compounding machine to keep compounding as long as possible.

Having retired last year at 62, I still have time until RMD's kick in. Our plan is to use my IRA to live on until SS kicks in at 67, FRA, and then take the rest out, up to max 12%tax rate, and do roth conversions. I want to hit 75, my RMD age, with an IRA balance where the withdrawl would be well within that 12% tax rate.

Thanks for the overview and insights Erin; hope all is well. Two recent articles related to this topic: 1) Charles Schwab-Tax-Efficient Withdrawal Strategies and 2) T. Rowe Price Insights - How to Make Retirement Account Withdrawals Work Best for You. Perhaps a follow-up video based on these alternative strategies of drawing on taxable and tax-deferred accounts in retirement? Take care!

I guess I am the oddball here. Retired at 66, almost 69 now. Divided everything by 4, and transferred all of it to savings (CD's, ect. ). Next year pay taxes and withdraw the final quarter, so all RMD's will vanish because zero left in tax deferred accounts. Solves 2 problems, nothing to think about, and all taxes are ( or have been ) paid at current rates. 2026, who knows how high income tax rates could go, as current rates may vanish.

Wonderful and insightful video. One consideration and reason to keep RMD's to their minimum is the income based Medicare IRMAA brackets which can substantially increase the cost of Medicare. Once you add Social Security, interest, dividend and other income to your RMD your adjusted gross income could place you into higher IRMAA brackets. If you cover RMDs in a future video you might want to mention this. AGI is very important to retirees.

First time I saw time I saw a video that has only been out for a couple seconds

My strategy for RMD'S for my wife and I is to take the minimum RMD from our traditional IRA's, pay the taxes created by it, then divide what remains between our 3 sons as a pre inheritance gift to be contributed to each of their Roth IRA's. That way the government only gets to tax it once. We have done Roth conversations every year as well to stay under the 12% tax rate. This year we may go over the 12% tax rate due to the expiration of the Trump tax cuts, but will still limit the conversions to stay under the income level that would increase our medicare premiums (which you might have mentioned in your video). I really enjoy your videos and the way you present the information.