Hi Reader,
Can You Reduce Your Required Minimum Distributions?
Required Minimum Distributions (RMDs) can increase your income taxes, Medicare premiums, and even the amount of your Social Security benefits subject to taxation.
The good news? There are strategies that may help reduce future RMDs or manage their tax consequences.
Here are five worth knowing:
❤️ 1. Qualified Charitable Distributions (QCDs)
If you're age 70½ or older, you can transfer money directly from your IRA to a qualified charity.
These distributions can satisfy your RMD without increasing your taxable income.
The 2026 limit is $111,000 per person.
🔄 2. Roth IRA Conversions
Convert traditional IRA funds to a Roth IRA. You'll generally pay taxes on the conversion today, but reduce the balance subject to future RMDs.
Roth IRAs have no RMDs during the original owner's lifetime.
📅 3. Strategic IRA Withdrawals
You don't have to wait until RMD age to begin withdrawing money from your IRA.
Taking distributions during lower-income retirement years may help reduce future RMDs and spread your tax liability over more years.
📈 4. Net Unrealized Appreciation (NUA)
If you own highly appreciated employer stock in your 401(k), special tax rules may allow you to transfer the shares to a taxable brokerage account.
When properly executed, this strategy can reduce future RMD exposure and allow qualifying appreciation to receive favorable capital gains treatment.
🏢 5. Delay RMDs While Still Working
Still working past RMD age?
Certain employer-sponsored retirement plans allow you to postpone RMDs until retirement, provided you meet the eligibility requirements.
The bottom line?
RMD planning shouldn't begin when you turn 73 or 75.
The years leading up to retirement can provide valuable opportunities to manage taxes and potentially reduce future required distributions.
A little planning today could make a meaningful difference in retirement.
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David N. Waldrop, CFP®
Owner of Bridgeview Capital Advisors, Inc. a Registered Investment Advisor.
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