Once you reach age 73, the IRS requires you to start taking required minimum distributions (RMDs) from your traditional retirement accounts. These distributions are taxed as ordinary income. That means your RMD could push you into a higher tax bracket, increase your Medicare premiums, and even subject more of your Social Security benefits to taxation.

The passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 preserved the current RMD age but made other tax law changes that affect how retirees should plan. Meanwhile, prior legislation, specifically the SECURE 2.0 Act of 2022, had already shifted RMD rules in several key ways. Understanding the interplay of both laws is critical to avoiding unpleasant tax surprises.

Understand your income picture

Avoiding tax spikes starts with knowing where you stand. Add up all your income sources, including pensions, Social Security, dividends, interest, capital gains, annuity payments, and part-time work. Then, model your upcoming RMDs based on your account balances and IRS life expectancy tables.

The key is to anticipate when your income will be unusually high and when you may be able to create low-income years. You can then begin mapping out strategies to smooth out your taxable income.

Use partial Roth conversions before RMDs begin

Consider strategic Roth conversions if you're still a few years away from RMD age. By converting a portion of your traditional IRA to a Roth IRA in a lower-income year, you pay tax at a potentially lower rate, reducing the size of your future RMDs.

The One Big Beautiful Bill Act (OBBBA) is legislation that expanded the phase-in thresholds for limitations on the qualified business income (QBI) deduction, setting the thresholds to $75,000 for single filers and $150,000 for joint filers, with adjustments for inflation. It was passed on July 4, 2025.
This gives some high-income households more room to do Roth conversions without affecting other deductions.

Spread out distributions strategically

Once RMDs begin, you are not required to take them all in one lump sum. You can spread distributions across the year. This gives you more control. For example, if you have a large capital gain or an unexpected windfall, you can delay the remainder of your RMD until later in the year when your taxable income is clearer.

This flexibility can help avoid crossing into the next Medicare Income-Related Monthly Adjustment Amount (IRMAA) bracket or triggering the 3.8 percent net investment income tax.

Consider qualified charitable distributions (QCDs)

Once you turn 70½, you can direct up to $108,000 per year (as of 2025) from your IRA to a qualified charity. This QCD counts toward your RMD but is excluded from your taxable income

For charitably inclined retirees, QCDs are one of the most powerful tools to reduce tax liability. They keep your adjusted gross income lower, which can reduce the taxation of your Social Security and lower Medicare premiums. The OBBBA indexed the QCD limit for inflation starting in 2024.

Use multiple retirement accounts for flexibility

If you have both traditional and Roth IRAs, you can use them strategically. While traditional IRAs are subject to RMDs, Roth IRAs are not. By drawing from your Roth accounts in years when RMDs would otherwise spike your income, you can smooth your taxable income.

If you're still working and have access to a Roth 401(k), the SECURE 2.0 Act eliminated RMDs from Roth 401(k)s beginning in 2024 for retirees who reach RMD age that year or later. Inherited Roth 401(k)s will still be subject to RMD rules for beneficiaries, who must take distributions within a specified timeframe.

Invest RMDs tax efficiently

Even if you don't need the money, you must take the RMD. What you do with that money matters. Reinvesting it into a taxable brokerage account using tax-efficient strategies can reduce the future tax burden. Favor low-turnover index funds, municipal bonds, and tax-managed funds.

The OBBBA increased the standard deduction and introduced a new senior deduction ($6,000 for individuals over 65). Depending on your total income, this may shield some of your investment income from taxes.

Use a donor-advised fund (DAF) during high-income years

If you know a year will be particularly high income due to a large RMD or other event, front-load charitable contributions into a donor-advised fund. You’ll get a large deduction in the current year and can distribute the funds to charity over time.

This approach is especially effective when paired with appreciated securities. You avoid capital gains tax on the gifted shares and deduct the full fair market value if held more than one year. The OBBBA left the rules for DAFs unchanged.

Evaluate the tax cost of delaying Social Security

Some retirees delay Social Security to increase their future benefits. While this can be smart, it’s important to run the numbers. If delaying Social Security means you rely more heavily on pre-tax withdrawals in your early retirement years, it may create a lower tax bracket that’s ideal for Roth conversions.

Once RMDs and Social Security benefits hit together, your tax bracket could jump. Pairing earlier Roth conversions with later Social Security can help level out your income and avoid bracket creep.

Revisit your estate planning goals

If your goal is to leave assets to heirs, Roth accounts have advantages. Roth IRAs don’t require lifetime distributions and beneficiaries get 10 years of tax-free growth. Traditional IRAs passed to heirs are subject to the same 10-year rule, but distributions are taxable.

The OBBBA increased the estate tax exemption to $15 million per person beginning in 2026, indexed for inflation using 2025 as the base year. This gives high-net-worth families more flexibility in managing IRA distributions across generations.

Keep your eye on bracket management

The goal is to take control of your income before it controls you. Think of RMD planning as a bracket management problem. Each year offers a window to take action. Roth conversions, QCDs, DAFs, account withdrawals, and Social Security timing are all tools. Use them intentionally.

With the expanded deductions and inflation indexing of charitable strategies under the OBBBA, alongside SECURE 2.0’s enhancements to Roth options, you have more ways than ever to manage RMDs without triggering a tax shock.

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