At 72, you may find yourself one year away from required minimum distributions (RMDs), but that narrow window could still offer an opportunity to reduce future mandatory withdrawals. Converting part of a traditional individual retirement account (IRA) to a Roth IRA or taking a voluntary distribution before they begin may help lower your balance.
The RMD Tax Trap That Can Leave You Paying More
RMDs generally begin at 73, and the size of the withdrawal depends largely on how much remains in your IRA. That can create a tax problem when the distribution lands on top of Social Security, pension payments, investment earnings and other income you already receive.
Reducing your IRA before RMDs start can give you more control over that tax hit. A Roth conversion moves funds into a Roth IRA, while a voluntary distribution removes them from the account. Either strategy can reduce how much will have to be withdrawn later, but both generally create taxable income now.
| Strategy | What happens now | Benefit | Drawback |
|---|---|---|---|
| Roth conversion | Funds move into a Roth IRA | Qualified withdrawals can be tax free, with no lifetime RMDs for the original owner | The converted amount is generally taxable that year |
| Voluntary distribution | Assets leave the IRA | Lets you withdraw funds in a lower-income year instead of waiting for a potentially higher-tax year | The withdrawal is generally taxable and the money stops growing tax deferred |
| No action | Savings stay in the traditional IRA | The account can keep growing tax deferred without an immediate taxable withdrawal | A larger balance can produce higher RMDs, potentially pushing more income into a higher tax bracket |
Lower RMDs could also limit how much of your Social Security is taxable (up to 85% of benefits) and may keep income below thresholds that increase Medicare Part B and Part D premiums.
A financial advisor can help you weigh the tax consequences for a Roth conversion or an early IRA withdrawal.
How Much Could a $50,000 Reduction Actually Save?
To show what you could pay in RMD taxes, let’s break down an example of a married couple filing jointly with $200,000 in taxable income and $900,000 in a traditional IRA.
When calculating your first RMD, divide your IRA balance from the end of the previous year by the life expectancy factor in the IRS Uniform Lifetime Table. 1 Added to the original $200,000, that would bring your total taxable income to $233,962. Using 2026 federal income tax rates, you could then calculate the resulting tax liability. 2
| Rate | Calculation | Amount |
|---|---|---|
| 10% | $24,800 × 10% | $2,480 |
| 12% | $76,000 × 12% | $9,120 |
| 22% | $110,600 × 22% | $24,332 |
| 24% | $22,562 × 24% | $5,415 |
| Total | $233,962 taxable income | $41,347 |
Federal tax on the original $200,000 would be roughly $35,932, so the RMD adds approximately $5,415 to the tax bill.
For a comparison, let’s assume that you reduce the traditional IRA by $50,000 at 72, either through a Roth conversion or a voluntary distribution. This example does not include investment gains, losses or other account changes, so either strategy would leave $850,000 in the traditional IRA at year-end. That would lower the first RMD to $32,075 ($850,000 ÷ 26.5) and put taxable income at $232,075.
| Rate | Calculation | Amount |
|---|---|---|
| 10% | $24,800 × 10% | $2,480 |
| 12% | $76,000 × 12% | $9,120 |
| 22% | $110,600 × 22% | $24,332 |
| 24% | $20,675 × 24% | $4,962 |
| Total | $232,075 taxable income | $40,894 |
Either approach trims the first mandatory withdrawal by $1,887 and reduces the federal tax associated with that RMD by about $453. The $50,000 conversion or taxable distribution generally creates taxable income at 72, so this example shows the tax reduction on the first RMD instead of the net savings from the strategy.
Two Ways to Manage RMD Taxes in Retirement
If you expect to earn more in retirement, one way to limit RMD taxes is converting traditional IRA funds to a Roth IRA during a lighter tax year. Paying the bill earlier can shrink the amount exposed to mandatory withdrawals and reduce the chance that those distributions push you into a higher bracket.
However, if you expect your earnings to drop in retirement, waiting to take IRA withdrawals could mean a lower tax rate. Another option involves charitable giving. Qualified charitable distributions (QCDs) can satisfy RMDs without adding the eligible amount to your taxable income.
A financial advisor can help you compare strategies and build an RMD plan around your retirement income.
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