How Required Minimum Distributions Change Your Tax Bill After Age 73

Starting in 2023 the age for required minimum distributions from traditional IRAs and 401(k) plans rose to 73. For millions of Americans born in the 1950s that date arrives soon.

The first RMD for someone turning 73 in 2026 must be taken by April 1 of 2027. These mandatory withdrawals count as ordinary income and can increase Medicare premiums, trigger higher taxes on Social Security benefits, and reduce eligibility for tax credits.

A retiree with a $600,000 traditional IRA might face an RMD of roughly $22,000 in the first year. Without planning that extra income can add thousands of dollars to the federal tax bill and change the after-tax value of every other dollar received in retirement.

The Current RMD Rules and Ages

The SECURE 2.0 Act of 2022 raised the RMD starting age from 72 to 73 for people who reach that birthday after December 31, 2022. The age will rise again to 75 in 2033. The IRS uses life expectancy tables published in Publication 590-B to calculate each year's distribution.

For a 73-year-old the uniform lifetime table divisor is 26.5. That means a $530,000 balance at year-end requires a minimum withdrawal of $20,000. Failure to take the full RMD triggers a 25 percent excise tax on the shortfall, reduced to 10 percent if corrected within two years.

Roth IRAs have no lifetime RMDs, which makes them attractive for legacy planning. The first RMD deadline is April 1 of the year after the year you turn 73, but taking two distributions in one calendar year can create a large tax spike.

How RMDs Affect Federal and State Taxes

RMDs are taxed as ordinary income at rates from 10 percent to 37 percent. A couple with $80,000 in other retirement income who must withdraw $35,000 from an IRA could move from the 12 percent bracket into the 22 percent bracket on part of their income.

In 2025 the 22 percent bracket for married filers begins at $94,601. The extra income also raises the taxable portion of Social Security benefits. Up to 85 percent of benefits become taxable once combined income exceeds $44,000 for joint filers.

Many states follow federal rules and tax RMDs as well. California, New York, and Pennsylvania each apply their own state income tax rates that can add 5 to 9 percent to the total bill.

Retirees in no-income-tax states such as Florida and Texas avoid that layer.

Impact on Medicare Premiums and Other Costs

Higher modified adjusted gross income from RMDs can trigger Income-Related Monthly Adjustment Amounts on Medicare Part B and Part D. For 2026 the standard Part B premium is $185 per month.

Couples with MAGI above $206,000 in 2024 pay an extra $74 to $506.90 per person per month. The surcharges are based on tax returns from two years earlier, so 2026 premiums reflect 2024 income.

RMDs taken in 2026 will affect 2028 premiums. Many retirees also lose eligibility for premium tax credits on Affordable Care Act plans before Medicare age if RMDs push income too high.

The Saver's Credit phases out completely at $73,000 of adjusted gross income for joint filers in 2026.

Strategies to Reduce the Tax Hit

One common approach is to convert portions of traditional IRA money to a Roth IRA in years when income is lower, such as the gap between early retirement and RMD age. Each conversion is taxable in the year it occurs but removes that amount from future RMD calculations.

Qualified charitable distributions allow donors age 70 and a half or older to send up to $105,000 directly from an IRA to charity in 2026. The amount counts toward the RMD but is not included in taxable income.

Another tool is to withdraw slightly more than the RMD in low-income years and place the excess in a taxable brokerage account that can be managed for long-term capital gains taxed at lower rates. Tax-loss harvesting inside taxable accounts can offset some of the ordinary income created by RMDs.

Real Numbers From Typical Retiree Portfolios

Consider a single retiree with a $750,000 traditional IRA who turns 73 in 2026. Using the current uniform lifetime table the first RMD equals about $28,300. If that person also receives $28,000 in Social Security and $12,000 in pension income, total taxable income rises to roughly $68,300 before deductions.

After the standard deduction of $15,000 the taxable amount is $53,300, which keeps most of it inside the 12 percent bracket for 2026. The same portfolio at age 80 will require an RMD near $39,000 because the divisor drops to 19.5.

That jump can push the retiree into the 22 percent bracket and raise Medicare premiums by several thousand dollars a year.

Coordination With Social Security and Other Income

Many retirees can lower lifetime taxes by delaying Social Security until age 70 and living on IRA withdrawals in the early years. This strategy uses lower tax brackets while reducing the size of the IRA before RMDs begin.

Once RMDs start, the higher distributions may make it wise to suspend or reduce other taxable income sources. The IRS allows a one-time QCD to satisfy an RMD and simultaneously support favorite charities.

In 2024 more than $1.5 billion flowed to nonprofits through QCDs according to IRS data. Careful timing of QCDs, Roth conversions, and charitable gifts can keep taxable income inside desired brackets for many years.

Common Mistakes and How to Avoid Them

A frequent error is forgetting the first RMD deadline of April 1 following the year the account owner turns 73. Taking that distribution in January of the next year creates two taxable events in the same calendar year.

Another mistake is assuming all retirement accounts can be aggregated. Only IRAs can be combined for RMD calculation; 401(k) plans must be handled separately unless the plan allows rollover.

Many people overlook state tax differences. New Jersey taxes retirement distributions differently than Pennsylvania. Working with a tax professional who understands both federal and state rules helps retirees avoid surprises.

Required minimum distributions are a fact of retirement life for most people who saved in traditional accounts. By understanding the rules early, running the numbers with current tax brackets, and using tools such as Roth conversions and qualified charitable distributions, retirees can keep more of their savings.

The key is to act before the first RMD year arrives. A single afternoon spent with last year's tax return and this year's projected RMD can prevent an unpleasant surprise on next April's tax bill.

Retirees who plan ahead often reduce lifetime taxes by tens of thousands of dollars while still supporting the causes and family members they care about.

Sources

• Internal Revenue Service, Publication 590-B, Distributions from Individual Retirement Arrangements (2024)
• Social Security Administration, 'Taxation of Retirement Benefits' (2025)
• Centers for Medicare and Medicaid Services, 'Medicare Premiums for 2026' (2025)
• Congressional Research Service, 'Required Minimum Distributions from Retirement Accounts' (2024)
• Employee Benefit Research Institute, 'The Impact of RMDs on Retiree Tax Bills' (2023)
• Kiplinger, 'New RMD Rules Under SECURE 2.0' (2025)