If you have built a large balance in traditional retirement accounts — a 401(k), 403(b), or traditional IRA — the IRS eventually requires you to start drawing it down and paying ordinary income tax on what comes out. These forced withdrawals are called required minimum distributions (RMDs), and for retirees with $500,000 or more in pre-tax accounts, the first few RMD years can feel like a shock: income you did not ask for, taxed at rates you did not plan for.
This guide explains how RMDs work under current law, why large pre-tax balances create a tax problem that grows quietly for decades, and the planning levers available before and after RMDs begin. Figures below are verified against IRS.gov as of August 2026.
What the rules actually say
Under current law you generally must begin taking RMDs from traditional IRAs, SEP IRAs, SIMPLE IRAs, and workplace plans such as 401(k)s and 403(b)s when you reach age 73. Your first RMD may be delayed until April 1 of the year after the year you turn 73; every later RMD is due by December 31. One important nuance: if you use the April 1 delay, you will take two RMDs in the same tax year — which can push you into a higher bracket for that year.
Roth IRAs are the exception: the IRS does not require withdrawals from Roth IRAs — or from designated Roth accounts in a 401(k) or 403(b) — while the account owner is alive. That asymmetry is the foundation of most RMD planning.
Missing an RMD is expensive. The amount not withdrawn may be subject to an excise tax of 25%, reduced to 10% if the shortfall is corrected within two years.
Why large balances create a “shock”
The RMD is calculated by dividing your prior year-end account balance by an IRS life-expectancy factor, so the dollar amount scales directly with the size of the account. A larger pre-tax balance means a larger mandatory distribution — all of it taxed as ordinary income, on top of Social Security, pensions, and any other income you already receive.
That stacking effect is what surprises people. A forced distribution can raise your marginal tax bracket, increase how much of your Social Security benefit is taxable, and lift your Medicare premiums through income-related surcharges (IRMAA) — costs that are set by your reported income from two years earlier. None of this requires markets to do anything unusual; it is simply the mechanics of deferred taxes coming due on a schedule you no longer control.
Planning levers before age 73
1. Manage the pre-tax balance deliberately. The years between retirement and age 73 — when wages have stopped but RMDs have not started — are often the lowest-income window of later life. Many retirees use this window to withdraw or convert pre-tax dollars intentionally at today’s known rates rather than waiting for forced distributions later. Whether that makes sense depends on your bracket now versus your projected bracket in RMD years, and it should be modeled with your advisor and tax professional before acting.
2. Consider Roth conversions in the gap years. Converting a portion of a traditional IRA to a Roth IRA is a taxable event in the year of conversion, but the converted dollars are no longer subject to lifetime RMDs. Conversions are a multi-year discipline, not a single transaction, and the right amount each year is a bracket-management decision.
3. Coordinate with Social Security timing. The decision of when to claim Social Security interacts directly with the size of your taxable RMD income later. These two decisions should be made together, not separately.
Planning levers at and after 73
Qualified charitable distributions. If you are charitably inclined, the tax code allows direct transfers from an IRA to qualified charities that can count toward your RMD without landing in your adjusted gross income. Age and dollar limits apply and are adjusted over time — confirm the current-year limits with your tax professional before executing.
Watch the first-year doubling trap. As noted above, delaying your first RMD to April 1 means two distributions in one tax year. For large accounts, taking the first RMD in the year you turn 73 instead is often worth evaluating.
Keep beneficiary designations current. RMD rules continue for beneficiaries after the owner’s death — including for inherited Roth IRAs — and the post-death distribution rules differ meaningfully by beneficiary type. An out-of-date designation can force a faster, more heavily taxed drawdown than intended.
The bottom line
RMDs are not a penalty — they are the tax bill on decades of deferral, arriving on the IRS’s schedule. The difference between a managed RMD season and a shocking one is usually decided in the five to ten years before age 73, while you still control the timing. If your pre-tax balances are large enough that forced distributions could move your bracket, that planning window deserves a deliberate, year-by-year plan.
Davies Wealth Management is a fee-based fiduciary registered investment adviser in Stuart, Florida. This article is educational only and is not tax, legal, or investment advice. RMD figures cited are from IRS.gov as of August 2026 and are subject to change; consult a qualified tax professional about your specific situation.
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