How Do RMDs Fit Into Your Retirement Income Plan?
Quick answer: Required Minimum Distributions (RMDs) are mandatory annual withdrawals from traditional IRAs, 401(k)s, 403(b)s, and similar tax-deferred retirement accounts that begin at the age specified in current tax law. For Columbus, Ohio retirees, RMDs become a fixed component of the retirement income picture once they begin — they're not optional, and the amount is calculated using account balances and IRS life expectancy tables. The income-planning question isn't whether to take RMDs (you must) but how to incorporate them: whether to spend them as income, reinvest excess amounts in taxable accounts, redirect them to charitable giving through Qualified Charitable Distributions, or coordinate the timing with other income sources. The most leveraged planning happens in the years before RMDs begin, when strategic decisions can reshape the eventual RMD picture. This article is educational; specific RMD advice requires a qualified tax professional working alongside a financial advisor.
Key Takeaways
- RMDs become a mandatory part of the retirement income picture once they begin — typically in the mid-70s under current tax law.
- The right approach to RMDs depends on whether the RMD amount matches, exceeds, or falls short of actual spending needs.
- When RMDs exceed spending, the "excess" can be reinvested in taxable accounts or redirected to charitable giving through QCDs.
- The most valuable RMD planning happens in the years BEFORE RMDs begin — through Roth conversions and strategic withdrawals.
- RMDs from large traditional balances can push retirees into higher tax brackets and Medicare IRMAA tiers.
- Roth IRAs do not have RMDs during the original account holder's lifetime — providing flexibility valuable for income management.
- For Columbus-area retirees, RMD planning is best coordinated between a financial advisor and tax professional.
Table of Contents
- Why RMDs Matter for Income Planning
- How RMDs Work
- Three Common Income Scenarios
- What to Do When RMDs Match Your Spending
- What to Do When RMDs Exceed Your Spending
- What to Do When RMDs Fall Short
- Pre-RMD Planning: The Most Valuable Window
- Using Qualified Charitable Distributions
- RMDs and the Retirement Paycheck
- Frequently Asked Questions
Why RMDs Matter for Income Planning
For Columbus-area retirees with traditional retirement accounts, RMDs are one of the most predictable features of late retirement — and one of the most consequential for the income picture.
The reason: RMDs are mandatory. Once you reach the age specified in current tax law (currently 73 or 75 depending on year of birth, per SECURE 2.0), you must withdraw at least a minimum amount from your traditional retirement accounts each year. The amount is calculated using your account balances and an IRS life expectancy factor. You don't control the size — only what you do with the proceeds.
The income-planning implications are significant:
- RMDs become a fixed component of taxable income once they begin
- RMDs may exceed spending needs in some years, particularly after strong market performance
- The "excess" RMD (what you don't spend) still must be distributed and taxed
- RMDs from large tax-deferred balances can push retirees into higher tax brackets
- RMDs count toward Medicare IRMAA and Social Security taxation
- RMDs cannot themselves be converted to a Roth IRA
The strategic question: For most retirees, the question isn't whether to take RMDs (mandatory) but how to integrate them into the broader income plan. The answer depends on whether the RMD amount matches, exceeds, or falls short of actual spending needs — and the right approach is different in each case.
For Columbus retirees in the years approaching RMD age, the most leveraged decisions are typically made before RMDs begin. Once mandatory distributions start, the planning options narrow considerably. This article is part of my broader guide on how to plan retirement income in Columbus, Ohio, which covers how RMDs fit with the rest of the retirement income picture.
How RMDs Work
The mechanics of RMDs have changed several times in recent years, but the basic structure has remained consistent.
When RMDs begin: The RMD age depends on year of birth. The age has been adjusted twice under SECURE Act and SECURE 2.0 legislation. Most current retirees fall under either 73 or 75 depending on their birth year. Consult IRS guidance or a qualified tax professional for your specific RMD start date.
Which accounts are affected:
- Traditional IRAs — RMDs apply
- Traditional 401(k)s, 403(b)s, 457s — RMDs apply (with some exceptions for retirees still working past RMD age at certain employers)
- Roth IRAs — No RMDs during the original account holder's lifetime
- Roth 401(k)s — Recent legislation eliminated RMD requirements (SECURE 2.0)
- Inherited accounts — Different RMD rules apply (covered separately in tax-mechanic resources)
How the amount is calculated:
Each year's RMD equals: previous year-end account balance ÷ IRS life expectancy factor for your age.
The IRS publishes Uniform Lifetime Tables that give the factor for each age. Married retirees whose spouse is more than 10 years younger and is the sole beneficiary may use a different table that produces smaller RMDs.
The timing rules:
- The RMD must be taken by December 31 of the year it's required
- There's a one-time exception for the first RMD year, which can be delayed until April 1 of the following year — though this creates a "two RMDs in one year" scenario the following year
- Multiple IRAs can be aggregated for RMD purposes; 401(k)s generally cannot
The penalty for missing:
Under current law, missing an RMD triggers a penalty (recently reduced from 50% to 25% under SECURE 2.0, with potential further reduction if corrected promptly). The penalty applies to the missed amount only, but the IRS has historically been reasonable about granting waivers for honest mistakes.
For the rest of this article, the focus is on the income-planning side of RMDs — not the tax mechanics. The mechanics are covered well by IRS publications and tax professionals; the income-planning integration is where most retirees benefit from additional support.
Three Common Income Scenarios
The right approach to RMDs depends on how the required amount relates to your actual spending needs. Three scenarios are common:
Scenario 1: RMDs match your spending needs. Your annual spending is roughly equal to the required distribution amount. The RMD funds your spending naturally, with no surplus or shortfall.
Scenario 2: RMDs exceed your spending needs. Your annual spending is less than the RMD amount. The RMD produces "excess" — taxable income beyond what you actually need for spending.
Scenario 3: RMDs fall short of spending needs. Your spending exceeds the RMD amount. You need additional withdrawals from retirement accounts or other sources to cover the gap.
The right strategy is different in each scenario. The next three sections walk through each.
For Columbus-area retirees, the first task in RMD planning is identifying which scenario you're in — and that depends on both your traditional account balances and your actual spending picture. Building a personalized retirement budget (which I cover in my piece on how much income you need in retirement) is the foundation for this analysis.
What to Do When RMDs Match Your Spending
For retirees whose RMDs roughly match annual spending needs, the income-planning approach is the most straightforward.
The basic flow:
- RMD is calculated each year based on previous year-end balance and IRS factor
- RMD is distributed to a checking or money market account
- That distribution funds the year's spending needs
- Other income sources (Social Security, pension) supplement the budget as planned
- Tax is paid on the RMD amount through withholding or estimated payments
Practical considerations:
- Timing the distribution: Some retirees take their RMD in one lump sum (often early in the year for tax-payment timing); others split it into quarterly or monthly distributions
- Withholding strategy: Federal withholding on RMDs is commonly elected at 10% by default. For retirees in higher brackets, larger withholding amounts may be needed to avoid underpayment penalties. Ohio withholding rules may also apply.
- Coordination with Social Security: If Social Security is already being received, the combined income from SS + RMD determines the tax picture for the year
- Sequence with other withdrawals: If other retirement account withdrawals are also planned, the RMD must be satisfied before or alongside other distributions
For Columbus-area retirees in this scenario:
The RMD essentially becomes the primary "retirement paycheck" mechanism — providing predictable annual income that matches household needs. This is often the simplest scenario from a planning standpoint, but it still requires:
- Annual review of the RMD calculation and spending budget alignment
- Withholding adjustments as needed
- Coordination with the broader tax picture (charitable giving, Roth conversions if still planned, IRMAA management)
- Plan for inflation — as spending needs grow over time, the RMD-as-income approach needs to keep pace
This scenario is most common for retirees whose traditional retirement balances were sized to provide income roughly matching spending — which often results from careful pre-retirement planning.
What to Do When RMDs Exceed Your Spending
For many retirees — particularly those with substantial traditional balances or those who saved aggressively — RMDs end up exceeding actual spending needs. This is sometimes called the "excess RMD" problem.
The math behind it: traditional accounts that have grown significantly over decades can produce RMDs that outpace any reasonable spending level. A retiree at 80 with $2.5 million in traditional accounts might face an RMD in the range of $130,000-$150,000 — even though their actual annual spending is $80,000.
The strategic question: What do you do with the excess RMD that's required to be distributed but isn't needed for spending?
Strategy 1: Reinvest in a taxable account.
The excess RMD, after taxes, can be deposited in a taxable investment account where it continues to grow. Future gains receive preferential capital gains tax treatment (federal level), and the assets eventually receive a step-up in basis at death — meaning the appreciation that builds in the taxable account may eventually pass to heirs without capital gains tax.
This approach effectively converts "mandatory distribution" into "after-tax investment." The tax is paid on the RMD as it's distributed, but the future growth and inheritance treatment can be favorable.
Strategy 2: Use Qualified Charitable Distributions.
For charitably inclined retirees of qualifying age (currently 70½ or older), Qualified Charitable Distributions (QCDs) allow the RMD to be sent directly to qualified charities. The amount counts toward the RMD requirement but is excluded from taxable income.
QCDs are particularly valuable for retirees in the "RMDs exceed spending" scenario because:
- They reduce the taxable income from RMDs
- They satisfy charitable goals tax-efficiently
- They keep Medicare IRMAA and Social Security taxation lower than they would otherwise be
- They don't require itemizing deductions to capture the tax benefit
For retirees giving $5,000-$50,000+ annually to charity, directing that giving through QCDs often produces better tax outcomes than any other approach.
Strategy 3: Bunch other tax-favorable activities into RMD years.
A retiree facing a large mandatory RMD already has a high-income year. That high-income year can be used for other strategically tax-efficient activities — completing pending Roth conversions where the math works, realizing capital gains in years already at higher brackets, etc.
The general principle: if you're going to have a high-income year anyway from the RMD, the marginal cost of additional planned-income activities is reduced.
Strategy 4: Gift to family or fund family accounts.
Excess RMDs can be used for annual gifts to family members within the annual gift tax exclusion, or to fund 529 plans for grandchildren, or for other family financial support. These transfers don't change the tax treatment of the RMD itself, but they redirect "excess" amounts to family planning goals.
For Columbus-area retirees in this scenario:
The "RMDs exceed spending" scenario is one where coordinated planning provides significant value. The choice between reinvesting, charitable giving, family transfers, or hybrid approaches depends on individual circumstances — and the right mix usually combines several strategies.
What to Do When RMDs Fall Short
Some retirees face the opposite situation: spending needs exceed the RMD amount, requiring additional withdrawals from retirement accounts or other sources.
The basic flow:
- RMD is taken as required
- Additional withdrawals are needed to bridge the gap to actual spending
- The source of additional withdrawals matters for the tax picture
Common sources for the additional withdrawals:
Traditional IRA or 401(k): Above-RMD withdrawals from traditional accounts are taxed at ordinary income rates, similar to the RMD itself. The advantage: simple administration, single account type to manage. The disadvantage: all withdrawals are taxable, no flexibility.
Roth IRA: Qualified Roth withdrawals are tax-free and don't add to MAGI for IRMAA or Social Security taxation. The advantage: significant tax flexibility, particularly valuable in years approaching or near IRMAA thresholds. The disadvantage: depletes Roth balances, which provide flexibility for future years.
Taxable accounts: Withdrawals from taxable accounts involve basis recovery (not taxable) and capital gains (taxed at preferential federal rates). The advantage: tax-efficient when realized gains are within preferential bracket thresholds. The disadvantage: depletes the taxable account base for future flexibility.
The choice between sources matters:
Different sources produce different tax outcomes. A retiree drawing $30,000 above their RMD from a traditional IRA produces additional fully-taxable income. The same $30,000 from a Roth IRA produces zero additional taxable income. The same $30,000 from a taxable account (with appreciated investments) might produce $10,000-$15,000 of taxable gain depending on basis.
For retirees in this scenario, the source decision should be made deliberately rather than by default. The optimal source can change year-to-year as the broader income picture shifts.
For Columbus-area retirees in this scenario:
This is the scenario where building Roth balances during pre-RMD years pays the most dividends. Roth assets provide tax-efficient flexibility for above-RMD spending — particularly in years where additional taxable income would push into higher brackets or trigger Medicare IRMAA tiers.
Pre-RMD Planning: The Most Valuable Window
The most consequential RMD planning happens in the years before RMDs begin — typically the 5-15 years between retirement and RMD age.
Why this matters:
Once RMDs begin, the amount is determined by a formula. There's limited flexibility in the actual RMD amount itself. The flexibility comes from what's done with the proceeds and from any strategic conversions or withdrawals before mandatory distributions start.
The strategies that work pre-RMD:
Strategic Roth conversions. Converting portions of traditional balances to Roth in pre-RMD years reduces the future RMD-eligible balance. The conversion is taxable in the year it occurs, but if it's done in lower-bracket years, the long-term tax math often works favorably. I cover this in my piece on Roth conversions for retirement income.
Voluntary traditional account withdrawals. For retirees who would face high RMDs and high tax brackets later, voluntary withdrawals from traditional accounts in lower-bracket years can reduce future RMD pressure. The withdrawals are taxable, but at lower rates than the future RMDs would face.
Sequencing decisions. In the gap between retirement and Social Security claiming, taxable account drawdowns vs. traditional account drawdowns vs. Roth conversions all have different long-term effects on the eventual RMD picture. Strategic sequencing during this window can meaningfully shape what RMDs look like later.
Charitable giving from a traditional IRA via QCD (once age-eligible). For retirees who can use QCDs (currently 70½+), directing charitable giving through the IRA before RMD age satisfies charitable goals while reducing future RMD-eligible balances. This pre-RMD QCD usage compounds with later QCD strategy.
An illustration:
A retiree at 63 with $1.8 million in traditional IRA assets has options:
- No planning approach: RMDs at 73 might be $90,000+, growing annually
- Strategic conversions approach: Converting $50,000-$70,000 per year over 10 years reduces the eventual RMD-eligible balance significantly. Combined with growth dynamics, RMDs at 73 might be in the $50,000-$60,000 range instead — with substantial Roth balances providing additional flexibility
The difference isn't just lower RMDs — it's more flexibility in late retirement, less tax bracket pressure, and tax-free assets for inheritance.
For Columbus-area retirees in pre-RMD years:
This is the highest-leverage planning window in retirement income management. The strategic decisions made between retirement and RMD age compound over the remaining 20+ years of retirement.
Using Qualified Charitable Distributions
For retirees of qualifying age who give regularly to charitable causes, QCDs are one of the most powerful income-planning tools available.
The basic mechanic:
A Qualified Charitable Distribution is a direct transfer from a traditional IRA to a qualified charitable organization. The retiree must meet the age requirement specified in current tax law (currently 70½ or older). The transfer goes directly from the IRA custodian to the charity — the retiree never takes possession of the funds.
Why QCDs matter for RMD planning:
- The QCD amount counts toward the RMD for the year
- The QCD amount is excluded from taxable income
- Income that doesn't appear in federal AGI doesn't flow into Medicare IRMAA, Social Security taxation, or Ohio AGI
- For non-itemizing retirees, QCDs are essentially the only way to get tax benefit from charitable giving
Strategic uses of QCDs in income planning:
Reducing taxable RMD income. For retirees with RMDs exceeding spending and substantial charitable giving plans, QCDs directly reduce the taxable portion of the RMD.
Managing IRMAA tier positioning. QCDs can be used to keep MAGI below an IRMAA tier threshold, avoiding Medicare premium increases.
Pre-RMD age use. Once a retiree is 70½+ but before RMDs technically begin, QCDs can still be made from a traditional IRA — reducing future RMD-eligible balances even before the RMD requirement starts.
Coordinating with other charitable strategies. For retirees with both IRA balances and appreciated investments, QCDs from the IRA can satisfy ongoing giving while appreciated investments are donated to a donor-advised fund for larger or lump-sum giving.
Annual limits:
QCDs are capped at a specific annual dollar amount per IRA owner (indexed for inflation in current tax law). Each spouse with their own IRA can make QCDs up to the per-person limit. Consult current IRS guidance for specific amounts.
For Columbus-area retirees:
QCDs are particularly valuable for retirees in the "RMDs exceed spending" scenario who also have meaningful charitable giving goals. Directing the unwanted excess RMD to charity via QCD captures triple value: charitable goals met, taxable income reduced, Medicare/Social Security tax effects avoided.
RMDs and the Retirement Paycheck
For retirees building a "retirement paycheck" — predictable monthly income that supports the household budget — RMDs become a central component of the paycheck structure.
Where RMDs fit:
In a typical retirement paycheck framework:
- Social Security covers part of the monthly need (the most predictable component)
- Pension (if applicable) covers another portion
- Portfolio withdrawals cover the remainder — and RMDs are part of this category once they begin
Practical mechanics:
Automated RMD distribution: Most custodians can automatically distribute the RMD on a monthly, quarterly, or annual schedule. Monthly distributions create a smoother "paycheck" feeling; annual or quarterly distributions reduce administrative complexity.
Coordinating with Social Security and pension: When all three are distributed monthly, the retiree's household income flows in a way that closely mimics a working paycheck. This consistency reduces financial stress and simplifies budgeting.
Cash buffer integration: A 6-12 month cash reserve smooths month-to-month volatility. RMDs typically flow first to the cash buffer, then to the operating checking account. The buffer absorbs variability and prevents the need for daily decision-making.
Annual recalibration: RMD amounts change each year based on the previous year-end balance. Annual review of the paycheck setup ensures it stays calibrated.
For retirees in the "RMDs exceed spending" scenario:
The paycheck approach can be split: a portion of the RMD funds the monthly paycheck for spending, and the excess is automatically reinvested in a taxable account or directed to a QCD plan. This automation keeps the household income predictable while handling the excess strategically.
We cover the retirement paycheck framework in detail in our forthcoming piece on how to create a retirement paycheck (coming soon in this series).
Frequently Asked Questions
What are Required Minimum Distributions? RMDs are mandatory annual withdrawals from traditional IRAs, 401(k)s, 403(b)s, and similar tax-deferred retirement accounts. They begin at the age specified in current tax law (currently 73 or 75 depending on year of birth under SECURE 2.0). The amount is calculated based on previous year-end account balance and an IRS life expectancy factor.
When do RMDs begin? The RMD age has changed in recent years. Under current tax law (SECURE 2.0), the RMD age is 73 for those born 1951-1959 and 75 for those born 1960 or later. Consult IRS guidance or a tax professional for your specific situation.
Are RMDs required from Roth accounts? No. Roth IRAs do not have RMDs during the original account holder's lifetime. Roth 401(k)s also no longer have RMDs following recent legislation. This makes Roth accounts particularly valuable for income flexibility in retirement.
Can I spend my RMD on anything I want? Yes. Once the RMD is distributed, the funds belong to you and can be used for any purpose — spending, reinvestment in a taxable account, gifts to family, charitable giving (via QCD before distribution, or via standard donation after distribution), or any other use.
What if I don't need the RMD income? Several strategies apply: reinvest the after-tax amount in a taxable account where it can continue to grow and eventually pass to heirs with stepped-up basis; redirect the RMD to charity through Qualified Charitable Distributions (which also reduces taxable income); use the RMD for family gifts or 529 plan contributions; or some combination of these approaches.
Can I delay my first RMD? The first RMD can be delayed until April 1 of the year following the year you reach RMD age. However, this creates a "two RMDs in one year" scenario the following year, which can stack income and push you into higher tax brackets. Most retirees take the first RMD in the first year rather than delaying.
What is a Qualified Charitable Distribution? A QCD is a direct transfer from a traditional IRA to a qualified charitable organization for retirees who meet the age requirement (currently 70½ or older). The QCD counts toward the RMD for the year but is excluded from taxable income, making it one of the most tax-efficient ways to fund charitable giving from IRA assets.
Can I make Roth conversions and take RMDs in the same year? Yes, but with an important sequence: the RMD must be taken before or alongside the conversion. RMDs themselves cannot be converted to a Roth IRA. Once the RMD is satisfied, additional amounts can be converted.
Should I work with a tax professional on RMD planning? Yes, particularly in the years approaching RMD age when the most strategic decisions can be made, and in the early years of RMDs when the income-planning framework is being established. RMD planning interacts with Social Security claiming, Medicare IRMAA, charitable giving, and estate planning — coordinated analysis typically produces better outcomes than handling each piece separately.
What happens if I miss an RMD? Missing an RMD triggers a penalty under current law (recently reduced by SECURE 2.0). The standard remedy is to take the missed RMD as soon as the error is discovered and file IRS Form 5329 to request a waiver of the penalty. The IRS has historically granted waivers for honest mistakes when prompt corrective action is taken.
Plan Around RMDs, Don't Just React to Them
For Columbus-area retirees, Required Minimum Distributions are one of the most predictable features of retirement income planning — and one of the most consequential. The amount may not be optional, but how you incorporate it into your income plan is.
The pattern that produces better outcomes: identify which scenario fits your situation (RMDs match, exceed, or fall short of spending), apply the appropriate income strategy, and start strategic planning early — ideally in the years before RMDs begin, when the most leveraged decisions can be made.
For the bigger picture of how RMDs fit into broader retirement income planning, see my pillar guide on how to plan retirement income in Columbus, Ohio. For context on the pre-RMD Roth conversion window, see my piece on Roth conversions for retirement income. For context on how RMDs intersect with the retirement paycheck, see my piece on Social Security claiming strategies for Columbus retirees.
At Blue Advisors, I work with Columbus-area retirees and pre-retirees to develop coordinated RMD strategies as part of comprehensive retirement income planning. I am a fee-only fiduciary registered investment advisory firm based in Columbus, Ohio. I work in partnership with our clients' tax professionals — not in place of them.
Schedule a conversation: If you're a Columbus-area retiree or pre-retiree thinking through RMD planning, you can book an introductory call here: calendly.com/jimblue/blue-advisors-meeting.
By James Blue, Fee-Only Advisor | Blue Advisors
James Blue is the founder of Blue Advisors, a fee-only registered investment advisory firm based in Columbus, Ohio, serving retirees, pre-retirees, and busy professionals across Central Ohio and nationally.
This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. RMD rules have been changed multiple times in recent years by SECURE Act and SECURE 2.0 legislation and may continue to change. Tax laws and rules vary, and individual tax situations vary significantly. The views expressed are those of the author as of the date published and are subject to change without notice. Blue Advisors is a fee-only registered investment advisory firm and is not a tax preparation firm or law firm. Readers should consult a qualified tax professional, the IRS, the Ohio Department of Taxation, and where applicable an attorney before making tax or financial decisions. Advisory services are offered only pursuant to a written advisory agreement and to clients in the State of Ohio, the Commonwealth of Pennsylvania, and other jurisdictions where Blue Advisors is properly registered or exempt from registration. Past performance is not indicative of future results. Specific RMD ages, penalty percentages, and dollar thresholds have been kept general — consult current IRS guidance for specific figures.