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If you've spent decades building a large IRA, you may be surprised to learn that the IRS has a withdrawal schedule waiting for you at age 73. For high net worth retirees, RMDs can quietly push you into a higher tax bracket, increase your Medicare premiums, and trigger taxes on more of your Social Security. But with the right strategy in place before RMDs begin, you can dramatically reduce the damage. Oak Street Advisors · Mt. Pleasant, SC & Myrtle Beach, SC · Fee-Only · Fiduciary Most retirees know that required minimum distributions exist. Fewer understand how significant a tax event they can become — particularly for those who've done everything right: maximized contributions to 401(k)s and IRAs for decades, stayed invested through market cycles, and arrived at retirement with a portfolio worth celebrating. Here's the uncomfortable truth: the IRS has been your silent co-owner in that pre-tax retirement account the entire time. RMDs are how they eventually collect. And if you have a large IRA, they can collect quite a bit — often at the worst possible time, stacked on top of Social Security income, pension payments, and investment distributions you were already managing. The good news is that RMDs are not a surprise. They follow a predictable schedule. That predictability is actually an advantage — if you start planning well before age 73, you have meaningful options to reduce what you'll owe. What Are RMDs and Why Do They Matter for High-Net-Worth Retirees?Required minimum distributions are mandatory annual withdrawals from pre-tax retirement accounts — traditional IRAs, 401(k)s, 403(b)s, SEP IRAs, and most other employer-sponsored plans. Under SECURE 2.0 legislation, RMDs begin at age 73 for most people (rising to 75 for those born in 1960 or later). The amount you must withdraw each year is calculated by dividing your account balance by an IRS life expectancy factor from the Uniform Lifetime Table. As your account grows and the divisor shrinks each year, your RMD grows too — often faster than people expect.  For a retiree with a $2 million IRA, that 3.77% means roughly $75,000 in required withdrawals in year one alone — whether you need the money or not. Over time, that number compounds. By age 80, the required percentage climbs above 5%. By age 85, it can exceed 6.5%. For clients in our practice with large pre-tax balances, this isn't just a tax line item. It's a structural planning problem that intersects with nearly every other part of their financial life. The RMD Tax Stack: Why It Hits Harder Than ExpectedThe challenge for high net worth retirees isn't RMDs in isolation — it's how RMDs interact with everything else. Consider a fairly typical scenario: a retired couple in their mid-70s with Social Security income, a pension or annuity, taxable brokerage account distributions, and a combined IRA balance of $2.5 million. Here's what their income picture might look like once RMDs kick in:  At that income level, this couple is firmly in the 22% but the dollar amount of tax paid only tells part of the story. Here are the second-order consequences that often catch retirees off guard: Medicare IRMAA Surcharges Medicare Part B and Part D premiums are income-tested. A single RMD that pushes your income over an IRMAA threshold can increase your annual Medicare costs by $1,000 to $5,000 per person — sometimes more. These thresholds are based on income from two years prior, which means you may not feel the impact until it's already locked in. Social Security Taxation Up to 85% of Social Security benefits become taxable once combined income crosses certain thresholds. For most HNW retirees, this threshold was crossed long ago — but RMDs can further amplify the effect by pushing more ordinary income into higher brackets. Net Investment Income Tax (NIIT) If your MAGI exceeds $250,000 (MFJ), your investment income — dividends, capital gains, rental income — may be subject to an additional 3.8% NIIT on top of regular capital gains rates. RMDs can push you over this threshold even in years when your investment income alone wouldn't.  The Three Strategies That Actually Move the NeedleComplaining about RMDs without a plan is just noise. Here are the strategies we use most often with clients who have large pre-tax balances and want to manage this proactively. 1) Roth Conversions Before Age 73 The most powerful tool in the pre-RMD window. Every dollar you convert from a traditional IRA to a Roth IRA today is a dollar that will not be subject to an RMD tomorrow. Roth IRAs have no required minimum distributions for the original account owner during their lifetime, and growth inside the account is tax-free. The optimal window for Roth conversions is typically between the year you retire and age 73 — a period when your income often dips below your working-years level, creating room in lower brackets to convert at a lower effective rate than you'd face once RMDs begin stacking on top of other income. For a retiree with a $1.5 million IRA at age 65, converting $80,000–$100,000 per year over eight years can reduce projected RMDs by 40–50% and save six figures in lifetime taxes. The exact amount to convert each year depends on current bracket, projected future income, cashflow needs, Medicare thresholds, and the makeup of the rest of the portfolio. 2) Qualified Charitable Distributions (QCDs) Satisfy your RMD while eliminating the income. If you are 70½ or older and charitably inclined, a qualified charitable distribution is one of the most tax-efficient moves available. A QCD allows you to transfer up to $111,000 per person, per year (2026 limit, indexed for inflation) directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded entirely from your taxable income. Compare this to the alternative: taking your RMD as a distribution, paying ordinary income tax on it, then making a charitable contribution and hoping to itemize. For most retirees taking the standard deduction, the deduction provides no tax benefit — but the QCD delivers one regardless. Critically, the QCD must go directly from the IRA custodian to the charity. You cannot take the distribution yourself and then donate it. If you are interested in using this strategy, the mechanics matter — it needs to be set up correctly. 3) Portfolio Structure and Asset Location Reduce the balance driving future RMDs. The smaller your pre-tax IRA balance when RMDs begin, the smaller your RMDs will be. This sounds obvious, but it has meaningful implications for how to structure a portfolio in the decade leading up to age 73. One approach is to intentionally spend down pre-tax accounts in early retirement before RMDs begin — covering living expenses from the IRA rather than a taxable brokerage account, even if it means paying some tax now. In many cases, paying a moderate rate today beats being forced to pay a higher rate later when Social Security, pensions, and investment income are all present. Asset location also matters: holding slower-growing assets (bonds, stable income) inside the IRA and higher-growth assets (equities) in Roth or taxable accounts can reduce the future pre-tax balance growth rate, while allowing tax-free growth to compound on the Roth side. What About the Inherited IRA Rules?One aspect of RMD planning that has become considerably more complex — and more urgent — since the SECURE Act of 2019 and its follow-on rules is the inherited IRA landscape. Prior to SECURE, most non-spouse beneficiaries could "stretch" inherited IRA distributions over their own life expectancy, allowing decades of continued tax-deferred growth. That option is largely gone. Today, most non-spouse beneficiaries are subject to a 10-year rule, requiring the entire inherited IRA to be distributed within 10 years of the original owner's death. For high-income adult children inheriting large IRAs, this can create a significant and compressed tax event.  Estate planning around IRAs has become significantly more nuanced. Naming the right beneficiaries, structuring trusts correctly, and coordinating IRA distributions with other estate assets requires careful attention — and the rules that applied five years ago may no longer apply today. How to Start: The Questions Worth Asking NowRMD planning is not a one-time conversation — it's an ongoing process that starts ideally five to ten years before RMDs begin. If you are in your 60s and haven't addressed this yet, here are the most important questions to bring to your advisor: What is my projected RMD at age 73 based on current account growth assumptions? Running this projection forward gives you a clear picture of the size of the problem — and the runway you have to address it. What Roth conversion amounts would keep me within my current bracket or below key IRMAA thresholds? The answer changes every year based on income, bracket adjustments, and account performance. Annual calibration matters. Am I giving to charity in a way that could be restructured as a QCD? Many retirees are writing checks to their church, alma mater, or favorite nonprofit every year without realizing the same dollars could come from the IRA tax-free. How is my portfolio structured, and are the right assets in the right accounts? Asset location is a low-visibility lever that can meaningfully affect long-term tax efficiency without changing what you own — only where you own it. Who are my IRA beneficiaries, and do the designations still reflect my intentions? Beneficiary designations override wills. They should be reviewed regularly, and the inherited IRA rules need to be understood by both you and your heirs. The Bottom LineRMDs are not a crisis — but they can become one if you arrive at age 73 with a large pre-tax balance, no strategy in place, and suddenly find yourself with taxable income that exceeds what you expected, pushes you into a higher bracket, triggers Medicare surcharges, and leaves less flexibility than you imagined. The retirees who handle this well are not the ones who ignored it. They're the ones who sat down with a fee-only fiduciary advisor in their early-to-mid 60s, ran the projections, understood the trade-offs between converting now versus paying later, and made deliberate choices about how to structure their income in retirement. That window — between retirement and RMD age — is finite. Once RMDs begin, your options narrow considerably. But if you're reading this before they start, you still have time to act. Frequently Asked Questions About RMDsAt what age do required minimum distributions begin? Under current law (SECURE 2.0), required minimum distributions begin at age 73 for most retirement account holders. The RMD age is scheduled to increase to 75 for those born in 1960 or later. Can I reduce or avoid Required Minimum Distributions? You cannot entirely eliminate Required Minimum Distributions (RMDs) from traditional IRAs or 401(k)s without fully liquidating or converting the accounts. However, a total elimination isn't always optimal—especially if you are charitably inclined, as you will want to preserve pre-tax assets to fund tax-free Qualified Charitable Distributions (QCDs). What is a Qualified Charitable Distribution (QCD) and how does it work? A QCD is a direct transfer from your IRA to a qualified charity. If you are 70½ or older, a QCD counts toward your RMD but is excluded from your taxable income — up to $111,000 per person, per year (2026, indexed for inflation). The transfer must go directly from your IRA custodian to the charity; you cannot receive the funds first and then donate them. How does a Roth conversion reduce future RMDs? Converting pre-tax IRA dollars to a Roth IRA reduces the balance in your traditional IRA, which directly lowers future RMD amounts. Roth IRAs are not subject to RMDs during the original owner's lifetime. The optimal time to convert is typically the period between retirement and age 73, when income is often lower and tax brackets are not yet fully stacked with RMD income. What happens to my IRA when I die — can my heirs stretch the distributions? For most non-spouse beneficiaries, the SECURE Act of 2019 eliminated the "Stretch IRA" strategy. Most heirs are now subject to a 10-year rule, requiring the inherited IRA to be fully distributed within 10 years. Converting to a Roth IRA before death means heirs receive tax-free distributions over that 10-year window rather than taxable ones. Is Your Retirement Portfolio Ready for RMDs?Oak Street Advisors is a fee-only fiduciary firm serving retirees in Mt. Pleasant, Myrtle Beach, and across South Carolina. We specialize in tax-efficient retirement income planning — including Roth conversion strategy, QCD implementation, and RMD forecasting. There's no product to sell, just a plan built around your situation.
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