6 RMD Mistakes That Can Spike Your Tax Bill -- and How To Avoid Them
Nothing is certain except death and taxes — and Uncle Sam wants to get to you before the Grim Reaper does.
Because of this, retirees are forced to take required minimum distributions (RMDs) from their tax-deferred accounts like IRAs and 401(k) plans starting at age 73. The better to tax you, my dear.
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Here’s the thing though: It’s easy to make mistakes around RMDs, and those mistakes can cost you dearly in unnecessary taxes. Watch out for these six RMD mistakes that can spike your tax bill and drain your retirement nest egg.
1. Missing or Under-Withdrawing an RMD
The most obvious mistake with an RMD is not taking it, or not taking enough.
Do that, and the IRS hits you with an extra 25% excise tax on the shortfall. That said, if you correct the issue within two years, that generally drops to 10%.
Word to the wise: Calculate your RMD at the beginning of each year and plan accordingly. Use this RMD calculator worksheet from the IRS to run the numbers.
2. Delaying Your First RMD
Uncle Sam lets you delay your first RMD from the year you turn 73 until the following April. But if you do that, you have to take double RMDs that next year.
“That can push your income into a higher bracket and increase your taxes on Social Security benefits,” explains elder law attorney Evan Farr. “It can also trigger net investment income tax (NIIT), eliminate some of your deductions or credits and increase your Medicare premiums two years later.”
3. Combining RMDs from Different Accounts
When you have multiple IRAs, you can generally calculate the combined total RMD from all of them and pay it from a single account if you prefer.
But you can’t do that with all types of retirement accounts.
“There are separate RMD determinations for traditional, SEP and SIMPLE IRA accounts,” Farr added. “You can’t pay RMDs for an employer plan from an IRA or another employer plan however.”
4. Taking RMDs Before Charitable Contributions
Retirees over 70 and a half can donate money directly from your IRA — tax-free and counting toward your RMD obligation. It’s called a Qualified Charitable Distribution, or QCD, and the annual limit is high ($111,000 in 2026).
“Even if you itemize your deductions, the QCD option is often better as it reduces income above the line, which may help reduce Medicare premiums if the taxpayer is dealing with IRMAA,” explains certified financial planner (CFP) Caleb Moyer of Moyer Tax Services.
Plan your charitable giving before you plan your RMDs. That reduces the taxable distributions you have to take from your retirement accounts.
5. Ignoring the Tax Ripple Effects from RMDs
Yes, you’ll owe taxes on your RMDs. But the tax implications go farther and wider than that.
Taking RMDs can push you into a higher tax bracket, to begin with. Xintian Wang, certified public accountant (CPA) with Alexander Accountants, urges retirees to make any Roth conversions before taking your first RMD. “Otherwise, it’s an excess distribution you have to unwind.”
She added that RMDs can have a devastating impact on your Medicare costs.
“Your 2026 RMD sets your 2028 premium and IRMAA is a cliff: One dollar over costs about $1,150 for the year,” according to Wang.
6. Waiting Until 73 To Plan RMDs and Taxes
Many of the best strategies for minimizing the tax damage from RMDs need you to plan years in advance.
To begin with, plenty of retirees have low-income, low-tax years in between retiring and taking RMDs. That window is sometimes the perfect time to drain your tax-sheltered retirement accounts, leaving taxable and Roth investments for later in your retirement.
In fact, you may want to fill up an entire lower tax bracket with Roth conversions, taking the hit in a lower-tax year.
“This helps decrease future RMDs as well, which can help keep less Social Security taxable, push the retiree down an IRMAA bracket and help keep them out of the higher tax brackets in the future," Moyer noted.
The longer you wait, the fewer tax options you’ll have. Form a plan with a tax strategist long before retiring or taking your RMDs, and you can tell the tax man to taketh a hike.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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