How to Reduce Your Required Minimum Distributions (RMDs) and Keep More of Your Money

By Stephen - info Pascoe • 03/31/2025

How to Reduce Your Required Minimum Distributions (RMDs) and Keep More of Your Money

Introduction: The RMD Tax Trap That Can Cost You Thousands

If you have money in tax-deferred accounts like a 401(k) or Traditional IRA, you’ll eventually be forced to start withdrawing it—whether you need the money or not.

At age 73, the IRS requires you to take Required Minimum Distributions (RMDs), which:
❌ Increase your taxable income and push you into a higher tax bracket.
❌ Raise your Medicare premiums due to IRMAA surcharges.
❌ Trigger taxes on your Social Security benefits if your income is too high.

The good news? You can take steps to reduce RMDs and control your tax bill. This blog will show you:
✅ Why RMDs are a tax problem for high-net-worth retirees.
✅ 5 powerful strategies to reduce your RMD burden.
✅ How to keep more of your retirement savings working for you.

Let’s dive in!

What Are RMDs, and Why Are They a Problem?

Required Minimum Distributions (RMDs) are the government’s way of ensuring you eventually pay taxes on your pre-tax retirement savings.

Starting at age 73, you must withdraw a minimum percentage of your tax-deferred accounts (Traditional IRA, 401(k), 403(b), SEP IRA, etc.) each year.

Age

RMD Percentage of Your Account Balance

~3.78%

~4.37%

~5.35%

~6.76%

~8.77%

The Problem: If you have $1M+ in a tax-deferred account, your RMDs could be $40,000-$80,000+ per year—which is added to your taxable income!

🚨 Consequences of High RMDs:

Push you into a higher tax bracket.

Increase your Medicare premiums (IRMAA surcharges).

Cause up to 85% of your Social Security benefits to be taxed.

Reduce the amount of wealth you can pass tax-efficiently to heirs.

Now, let’s explore how to reduce RMDs and keep more of your money.

5 Ways to Reduce Your RMDs (and Lower Your Tax Bill)

1. Do Roth Conversions Before RMDs Begin

💡 Best for: Retirees who are in a lower tax bracket before age 73.

How it works:

Convert pre-tax money from a Traditional IRA or 401(k) into a Roth IRA.

Pay taxes on the conversion now (when you’re in a lower bracket).

Roth IRAs are NOT subject to RMDs—ever.

Why it works:
✔ Reduces your tax-deferred balance, lowering future RMDs.
✔ Creates tax-free income for retirement.
✔ Avoids higher tax brackets later when RMDs kick in.

🚀 Example Strategy:

Convert just enough each year to stay within a lower tax bracket (e.g., 12%, 22%, or 24%).

Avoid jumping into the 32%+ bracket unless necessary.

2. Withdraw Strategically Before RMD Age (73)

💡 Best for: Retirees with large tax-deferred accounts who can withdraw strategically.

Instead of waiting until 73 to take RMDs, consider withdrawing some money earlier to spread out the tax burden.

Why it works:
✔ Reduces future RMDs by lowering your pre-tax account balance.
✔ Avoids tax bracket spikes later in retirement.
✔ Gives you more control over your taxable income.

🚀 Example Strategy:

Take withdrawals from 401(k)/IRA before Social Security starts to minimize taxes.

Use those withdrawals to fund living expenses or reinvest in a taxable brokerage account.

3. Give to Charity Using Qualified Charitable Distributions (QCDs)

💡 Best for: Retirees who are charitably inclined and want to reduce taxable income.

A Qualified Charitable Distribution (QCD) lets you donate up to $100,000 per year directly from your IRA to charity—WITHOUT paying taxes.

Why it works:
✔ Satisfies RMD requirements without increasing taxable income.
✔ Reduces your adjusted gross income (AGI), helping lower Medicare IRMAA surcharges.
✔ Helps support charitable causes in a tax-efficient way.

🚀 Example Strategy:

Instead of taking an RMD that increases your tax bill, send $10,000+ directly to charity and avoid taxes.

If you don’t need the RMD money, QCDs are a win-win.

4. Work a Few Extra Years & Delay RMDs

💡 Best for: Retirees who are still working past 73 and have a 401(k).

If you are still employed at 73+, you may be able to delay RMDs from your current employer’s 401(k)—as long as you own less than 5% of the company.

Why it works:
✔ Delays taxes on RMDs, allowing your money to keep growing.
✔ Lets you stay in a lower tax bracket until you fully retire.

🚀 Example Strategy:

Keep working past 73 and delay RMDs from your current employer’s 401(k).

Roll over old 401(k) plans into your current one to reduce RMDs further.

5. Use a Donor-Advised Fund (DAF) for Tax-Efficient Giving

💡 Best for: Retirees who want charitable tax benefits beyond QCDs.

A Donor-Advised Fund (DAF) allows you to donate a large amount in one year (for tax deductions) while spreading out charitable giving over time.

Why it works:
✔ Can be used in years when you have high taxable income (like from RMDs).
✔ Provides immediate tax deductions while supporting charities over time.

🚀 Example Strategy:

Use a DAF to "front-load" charitable donations in a high-tax year to reduce AGI.

Final Thoughts: Take Control of Your RMDs Before the IRS Does

You don’t have to let RMDs dictate your tax bill. By using smart tax strategies, you can:
✅ Reduce your taxable income and avoid Medicare IRMAA surcharges.
✅ Keep more of your retirement savings working for you.
✅ Ensure a more tax-efficient legacy for your heirs.

📥 Download Your Free Retirement Readiness Checklist Here Download Here

📅 Schedule a Consultation to Reduce Your RMD Tax Burden Click Here

Securities offered through Van Clemens & Co., member FINRA/SIPC. Advisory services offered through Van Clemens Wealth Management, a registered investment advisor. Van Clemens & Co. and Van Clemens Wealth Management are separate entities from Inspire Financial Services. CA License: 4234803.

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