How to Win RMD Season

Every year around this time, my inbox fills with the same kind of message:
“Hey, just checking… do I still need to take my RMD?”

Short answer: yes. Longer answer: you probably don’t want to wait until December 30th to figure it out.

RMDs, short for Required Minimum Distributions, are one of those retirement rules that sound more annoying than important until you realize they can quietly reshape your tax picture if you handle them right (or wrong). So let’s break it down, coffee-table style, and talk about how they work, what’s changing, and how to make them less of a tax headache.

What’s an RMD, Really?

Think of your IRA, 401(k), or 403(b) as a deal you made with the IRS decades ago. They said: “We’ll let your money grow tax-deferred for as long as you leave it alone.” The fine print? Eventually, they want their share.

That “eventually” kicks in at age 73 for most folks today. If you turned 73 this year, congratulations, you’re officially on the IRS’s distribution schedule. That means each year, you have to take out a minimum amount from your pre-tax retirement accounts whether you need the money or not.

If you miss the deadline (December 31st), the penalty used to be an eye-watering 50% of the amount you should have taken. Congress softened that recently; it’s now 25%. Still, that’s not a holiday surprise you want.

How the Calculation Works

It’s not as mysterious as it looks on the IRS table. Here’s the general idea:

1. Look at your account balance from the previous year’s December 31.
2. Divide it by your “life expectancy factor” from the IRS Uniform Lifetime Table.

So if your IRA was worth $1 million last December and your factor is 26.5, your RMD for this year would be roughly $37,700.

And yes, if you have multiple accounts, things can get messy:

• Traditional IRAs: You can combine them and take your total RMD from just one IRA if you want.
• 401(k)s or 403(b)s: Those must each be handled separately, even if they’re old employer plans gathering dust.

That’s why one of my standing recommendations is to consolidate old accounts before RMD age. Less math. Less chance of forgetting one and triggering a penalty.

The Tax Bite: What You Should Know

RMDs are taxed as ordinary income with no capital gains break and no special rate. They stack right on top of your Social Security, pensions, dividends, and other income. That means a big withdrawal could:

• Bump you into a higher marginal tax bracket
• Trigger higher Medicare premiums (IRMAA surcharges)
• Affect how much of your Social Security is taxable

It’s the financial equivalent of stepping on a rake if you’re not careful.

But the silver lining? You have options.

Smart Ways to Take Your RMDs

Let’s talk strategy. The rules say you have to take them, but not how, when, or where the money has to go. That’s where planning makes a real difference.

1. Take It Early (Strategically)
   You technically have until December 31st, but that doesn’t mean you should wait. Markets dip, custodians get backed up, paperwork lags. Every year, I see someone panicking around Christmas because a transfer didn’t settle in time.

   For retirees who rely on the income anyway, spreading withdrawals throughout the year (monthly or quarterly) can also help smooth out taxes and cash flow, like giving yourself a paycheck again.

2. Qualified Charitable Distributions (QCDs)
   If you’re charitably inclined and over 70½, this is hands-down one of the best moves out there. Instead of taking your RMD and then writing a donation check, you can send money directly from your IRA to a qualified charity (up to $108,000 in 2025).

   That amount counts toward your RMD but doesn’t show up as taxable income. Translation: you satisfy the IRS without increasing your AGI. You might even lower your Medicare costs or the tax on your Social Security. That’s a win-win for you and the cause you care about.

3. Withholding as a Tax Strategy
   Here’s a lesser-known trick: you can have taxes withheld directly from your RMD. Why care? Because withholding counts as if it happened evenly throughout the year, even if you do it in December.

   That can help avoid underpayment penalties, especially if you’ve had uneven income during the year. It’s one of those quiet “advisor moves” that can make April 15th much friendlier.

4. Gifting Within the Family (Carefully)
   Your RMD can fund 529 college savings plans, annual gifts to family members, or Roth IRA contributions for kids or grandkids (if they have earned income). Just remember, it’s taxable to you first. Still, this can turn something the IRS requires into something meaningful.
5. Reinvest the RMD
   If you don’t need the cash, reinvest it in a taxable brokerage account. We can use ETFs or tax-efficient funds to keep taxes low while still keeping your money working. The key is not letting required withdrawals sit idle in your checking account unless you truly need them for spending.
6. Roth Conversion Planning Before RMD Age
   Once you start RMDs, you can’t convert those dollars to Roth. So if you’re under 73, this is your window. Converting pieces of your pre-tax accounts to Roth can reduce future RMDs and build tax-free flexibility later. Many of my clients use their 60s as a “tax sweet spot” between working years and RMD age to make this move strategically.

Common Missteps We See Every Year

Let’s call out a few repeat offenders:

• Waiting until the last week of December. Don’t do it. Custodians are human.
• Forgetting inherited IRAs. The 10-year rule for beneficiaries adds complexity. If you inherited an IRA in recent years, double-check your timeline.
• Withdrawing from the wrong account. Especially common with couples. The IRS doesn’t care whose name is on what; they track RMDs separately.
• Taking too much early. Once you withdraw, you can’t “undo” it. Plan around your tax bracket before hitting withdraw.

What We’re Doing for Clients Now

This time of year, my team and I are cross-checking every client who’s RMD-eligible. We’re confirming calculations, coordinating with Schwab for smooth distributions, and looking for opportunities to reduce the tax bite before the clock runs out.

If you haven’t taken your 2025 RMD yet, consider this your friendly reminder: you’ve got less than two months left.

We can handle it early, avoid year-end chaos, and maybe even free up a little more mental space to enjoy the holidays instead of waiting on hold with a brokerage.