What Nobody Told You About Forced Withdrawals
You spent decades saving into tax-deferred retirement accounts. You did everything right.
What nobody told you is that at age 73, the government stops asking and starts requiring.
Required Minimum Distributions are mandatory annual withdrawals from your traditional retirement accounts. Miss them and the IRS charges a 25% penalty on whatever you did not take.
Most people find out about RMDs too late to fully prepare. And by then, the cost is bigger than just a tax bill.
Most people don’t retire broke. They retire unprepared.
What RMDs Actually Are
Starting at age 73 (or 75 if born in 1960 or later), the IRS requires you to withdraw a minimum amount from your tax-deferred accounts every year, including:
- Traditional IRAs
- 401k and 403b plans
- SEP and SIMPLE IRAs
- Most employer-sponsored tax-deferred accounts
Roth IRAs are exempt during the original account owner’s lifetime. That distinction matters more than most people realize.
Your RMD is calculated by dividing your prior year-end account balance by a life expectancy factor from the IRS table. At age 73, that means roughly 3.8% of your balance must be withdrawn. That percentage increases every year after.
The Real Problem: The Cascade Effect
The RMD itself is not the only cost. It is what the RMD triggers.
1. Higher Tax Bracket
Every RMD dollar is taxed as ordinary income. Stack it on top of Social Security, pension payments, and investment income and you may land in a bracket you never planned for.
Many retirees move from a 22% bracket into the 24% or higher bracket not because they overspent, but because their forced withdrawal pushed total income over the threshold.
2. Social Security Taxation
When combined income exceeds $34,000 for single filers or $44,000 for married filers, up to 85% of Social Security benefits become taxable.
Your RMD counts toward that threshold. This means you could be paying taxes on income you already paid into for decades, triggered by a withdrawal you were never given a choice about.
3. Medicare Premium Surcharges
Medicare uses a two-year lookback to set your Part B and Part D premiums. If your income in a given year crosses the IRMAA threshold, your healthcare premiums increase the following two years.
In 2026, those surcharges begin at:
- $109,000 for single filers
- $218,000 for married filers
One large RMD year can raise your Medicare costs for two years running.
4. The Double RMD Trap
The IRS allows you to delay your first RMD until April 1 of the following year. Many people take this option assuming they are buying time.
The consequence: you must also take your second RMD by December 31 of that same year. Two full distributions. One tax year. The combined income impact can trigger all three of the above consequences simultaneously.
For most people, taking the first RMD in the year they turn 73 is the cleaner choice.
5. The Growing Snowball
RMDs increase automatically every year. As you age, the divisor in the IRS table shrinks, which means the required withdrawal grows whether your account grows or not.
What feels manageable at 73 may feel significantly heavier at 80. And every year it continues to interact with your Social Security income, Medicare premiums, and tax bracket.
The Window Most People Miss
The years between age 59 and a half and RMD age are the most valuable planning window available. During this time you can:
- Take voluntary withdrawals from tax-deferred accounts on your own terms before the government forces them
- Review Roth conversions to shift money into tax-free accounts and reduce the future RMD base
- Draw down traditional accounts strategically to keep income in lower brackets each year
- Explore Qualified Charitable Distributions if you are charitably inclined, up to $111,000 annually directly from your IRA, which satisfies part of the RMD requirement without adding to taxable income
Once RMDs begin, your options narrow. Planning before the deadline arrives is where the real opportunity lives.
Practical Steps to Take Now
Review every tax-deferred account you hold.
List all traditional IRAs, old 401ks from previous employers, SEP IRAs, and SIMPLE IRAs. Many people have accounts they have not reviewed in years.
Estimate your future RMD.
Use your current balance and expected growth rate to estimate what the forced withdrawal might be at age 73, 80, and 85. The number usually surprises people.
Model the cascade.
How does that RMD interact with your Social Security income? Does the combined total push you above the Social Security taxation threshold? Does it approach the IRMAA Medicare surcharge thresholds?
Review your withdrawal sequence.
Which accounts should you draw from first, second, and later? Taxable accounts, tax-deferred accounts, and tax-free accounts each have different implications. The sequence matters.
Identify whether your income is structured or scattered.
Do you have a coordinated income plan, or a collection of accounts with no clear withdrawal strategy? Every account should have a defined purpose.
Review regularly.
Tax laws change. Account balances shift. Medicare thresholds adjust. A plan built today needs to be reviewed as life and markets evolve.
A Quick Self-Review
Ask yourself these questions honestly:
- Do I know when my RMDs begin based on my birth year?
- Have I estimated how large my forced withdrawals will be at age 73, 80, and 85?
- Do I know how my RMDs will affect the taxation of my Social Security benefits?
- Do I know whether my combined income in RMD years will trigger Medicare premium increases?
- Have I reviewed whether Roth conversions or early voluntary withdrawals make sense before RMDs begin?
- Do I have a tax-aware withdrawal sequence for my retirement accounts?
- Has my retirement strategy been reviewed in the last twelve months?
If most of these feel unclear, your plan may still be focused on accumulation without a strategy for the tax environment that follows. That is not a failure. It is information. And acting on it now gives you far more options than waiting until the withdrawals are mandatory.
Final Thought
RMDs are not a punishment. They are the cost of doing something right for decades. The tax deferral was always temporary. The government was always going to collect.
The question is not whether RMDs will happen. They will. The question is whether your retirement is positioned to handle them without derailing your income, inflating your tax bill, raising your healthcare costs, and reducing what you actually get to keep.
The earlier you review how your money is structured, the more room you have to prepare.
download our Retirement Ready Guide or book a Compatibility Call to start creating more clarity around your retirement income, taxes, protection, and long-term stability.
