7 Strategies to Reduce RMD Taxes in Retirement

Required Minimum Distributions (RMDs) are one of the most common “surprise tax problems” retirees run into, not because the rules are confusing, but because the consequences are expensive. A large pretax IRA or 401(k) can feel like a great win until RMDs start forcing withdrawals you don’t actually need, pushing you into higher tax brackets, raising Medicare premiums, and even making more of your Social Security taxable. The good news is there are several legitimate ways to reduce the impact of RMDs, but the best strategy depends on what your retirement income plan looks like, not what a tax headline says.

What RMDs are (and why they can become a tax problem fast)

RMDs are mandatory withdrawals from pretax retirement accounts like traditional IRAs and most 401(k)s. Once you reach the required age, the IRS forces you to start pulling money out whether you need it or not, and those withdrawals generally count as taxable income. RMDs aren’t a flat dollar amount, they’re calculated as a percentage of your account balance, and that percentage increases as you get older. That means your required withdrawal tends to rise over time, especially if the account continues growing. If you don’t plan for this, RMDs can create a retirement tax spike right when you want stability the most.

First, a reality check: not everyone needs to reduce their RMDs

This is the part that gets skipped in most retirement advice. Reducing RMDs is only useful if your RMDs are going to be higher than what you would normally withdraw anyway. If your retirement plan already requires you to pull more than your RMD amount each year to fund your lifestyle, then the RMD isn’t really the problem, it’s just the minimum. The bigger issue becomes managing taxes on withdrawals overall. But if you have a large pretax balance and modest spending needs, then RMDs can create “phantom income” that increases taxes without improving your quality of life.

Strategy #1: Roth conversions in the “tax planning window”

One of the most effective ways to reduce future RMDs is to shrink your pretax accounts before RMDs begin. That’s exactly what Roth conversions do. A Roth conversion moves money from a traditional IRA into a Roth IRA, and you pay taxes on the amount converted in the year you do it. That sounds painful at first, but the logic is simple: pay taxes earlier at a known (and often lower) rate to avoid paying them later at a higher rate when RMDs and Social Security stack up on top of each other. The best time to do Roth conversions is usually the gap between retirement and when you turn on Social Security and RMDs. For many retirees, those early retirement years are the lowest-tax years they’ll ever have again, and that’s the window where conversions can make the biggest difference.

Strategy #2: Delay Social Security to create more low-tax years

Social Security is a powerful income source, but it also adds taxable income into the mix. If you start Social Security early, you shrink your ability to do Roth conversions without pushing yourself into higher tax brackets. Delaying Social Security, especially delaying it until age 70, can create a longer stretch of years where your taxable income stays low, giving you more room to convert pretax money to Roth strategically. Then later, when Social Security does start, the monthly benefit is larger, and your need to withdraw from your portfolio may be smaller. That combination can reduce pressure on RMDs and improve overall tax efficiency. This strategy is not right for everyone, but for people with strong savings and long life expectancy, it can be a major advantage.

Strategy #3: Use Qualified Charitable Distributions (QCDs)

If you’re charitably inclined, QCDs are one of the cleanest and most tax-efficient tools available. Once you’re age 70½ or older, you can donate directly from your IRA to a qualified charity using a Qualified Charitable Distribution. The key benefit is that the distribution does not count as taxable income, even though it satisfies part (or all) of your RMD. That means you can reduce your RMD tax hit while still supporting causes you care about. For retirees who already donate each year, this can be far better than taking the RMD as income and then writing a check to charity afterward. Done correctly, it’s one of the rare retirement moves that can lower taxes without requiring complicated investing changes.

Strategy #4: Keep working (and delay 401(k) RMDs)

If you continue working past your RMD age and you’re contributing to an employer 401(k), you may be able to delay RMDs from that 401(k) while you’re still employed. This typically applies as long as you don’t own more than 5% of the company. This rule doesn’t usually delay IRA RMDs, but it can help people who have large balances inside an active workplace plan. The key here is that working longer should be a lifestyle choice, not a tax prison. If you enjoy what you do and want to keep earning, this can create additional flexibility in your retirement income strategy.

Strategy #5: Use the right life expectancy table (especially with a younger spouse)

RMDs are calculated using IRS life expectancy factors. Most people use the standard table automatically, but if you’re married and your spouse is significantly younger than you, you may qualify to use the joint life expectancy table, which lowers your required withdrawal percentage. That can reduce your RMD amount each year, keeping more money sheltered and potentially reducing taxes. It’s not a strategy you can “create,” but it’s one you should know about if it applies to your household.

Strategy #6: Manage asset location to control how fast RMDs grow

A sneaky part of RMDs is that they don’t just create taxable income, they can also accelerate over time if the pretax account grows aggressively. This is where asset allocation and account location matter. If you have both Roth and pretax accounts, it can make sense to keep higher-growth assets in Roth accounts and more conservative holdings in traditional accounts, depending on your goals. The reason is simple: growth inside the traditional IRA increases future RMDs, while growth inside Roth accounts creates tax-free flexibility and does not generate RMDs during your lifetime. This doesn’t mean you should make your traditional IRA “too conservative,” but it does mean you should think intentionally about where growth lives, especially if your RMDs are likely to be larger than your spending needs.

Strategy #7: Plan for heirs (because big IRAs can become their tax problem)

If you have a large IRA and your goal is to leave money behind, RMD planning becomes a family tax strategy, not just a personal one. Under current rules, most non-spouse heirs must withdraw the full inherited IRA within 10 years. That can create a major tax spike for adult children who are already in their peak earning years. In other words, you may avoid taxes today, only to hand your heirs a tax bomb later. This is why Roth conversions can be so powerful for legacy planning. A Roth IRA inherited by your kids may still have distribution requirements, but the withdrawals can be tax-free, which is a completely different outcome. In certain situations, charitable planning tools may also help reduce taxes while creating a structured inheritance strategy, but those decisions need to be aligned with your values and your heirs’ tax realities.

The smartest RMD strategy is the one that matches your retirement lifestyle

Reducing RMDs isn’t about “beating the IRS.” It’s about controlling your cash flow, keeping taxes predictable, and protecting your retirement lifestyle from avoidable income spikes. The best plans are rarely built on one tactic. They usually combine multiple moves over time: Roth conversions in low-income years, Social Security timing, QCDs for charitable giving, and a clear understanding of how taxes affect both you and your heirs. If there’s one lesson retirees learn too late, it’s that RMDs aren’t just a withdrawal rule, they’re a tax system trigger. Planning early gives you options. Waiting until the year your RMDs start usually means you’re stuck reacting instead of controlling the outcome.

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. 

Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.