How Can I Reduce the Amount of My RMD Payments?

In the year that a required minimum distribution (RMD) is due from a 401(k), IRA or other pre-tax retirement account, you must withdraw a certain amount and pay taxes on it. If you don’t, you’ll face a penalty of up to 25% of the amount you were supposed to withdraw. But what if you don’t need the income from your RMDs and want to reduce them, not to mention the associated taxes? The good news is that with proper planning, you can reduce or even eliminate the impact of minimum distributions.

If you want a professional to guide you through an RMD strategy, you can get matched with a financial advisor for free.

What Are Required Minimum Distributions?

A required minimum distribution (RMD) is a mandatory withdrawal from pre-tax retirement portfolios, such as 401(k), 403(b) and IRA plans. Beginning at age 73, you must withdraw a minimum amount from each pre-tax portfolio by the end of the year. You can withdraw this money in any increments and at any time, so long as you take out the full value by December 31.

This rule applies separately to each applicable pre-tax portfolio. For example, say that you have a 401(k) and a traditional IRA. Each portfolio will have its own minimum distribution.

When you withdraw this money, you will pay income taxes on it. This is the purpose of minimum distributions, since the IRS wants to make sure you eventually pay some taxes on a pre-tax portfolio.

If you do not take the minimum distribution from a given pre-tax account, you generally will be charged a 25% excise tax on the amount not taken. For example, say that you underdraw your account by $5,000. In this case, the IRS may charge you up to $1,250 in taxes. If, however, you manage to correct this mistake within two years, the IRS may lower the amount of the penalty to 10%.

How RMDs Are Calculated

For each year, for each pre-tax account, the RMD is calculated by taking the account balance as of the end of the previous calendar year and dividing by your uniform lifetime distribution period. The distribution period is a value set based on your age and marital status. It is published in a series of RMD tables by the IRS and declines for each year of age, proportionally increasing your RMD requirements as you get older.

Run the numbers on your RMDs to see how much of your savings you’ll need to withdraw starting at age 73 or 75.

Required Minimum Distribution (RMD) Calculator

Estimate your next RMD using your age, balance and expected returns.

Quickly estimate your RMDs and when to take them

RMD Amount for IRA(s)

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RMD Amount for 401(k) #1

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RMD Amount for 401(k) #2

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About This Calculator

This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.

For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.

^*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.

Assumptions

This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.

This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.

However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.

For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.

This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.

Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.

SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.

As an example of how the calculation works, say that you are 75 and unmarried. On December 31 of last year you had an IRA with $500,000 in it. In this case, you would calculate your RMD as follows:

RMD = End of Year Balance / Uniform Distribution Period
RMD = $500,000 / 24.6

In this case, your RMD would be $20,325, meaning you must withdraw at least that amount from your IRA by December 31.

How to Reduce Your Required Minimum Distributions

This brings us back to the main question: How can you reduce your RMDs? And, specifically, how can you reduce the associated tax impact?

Some of the most effective ways to approach this include:

Make a Qualified Charitable Distribution

To the extent that you must withdraw this money, you can manage your tax position with what is called a “Qualified Charitable Distribution” (QCD). With a QCD, you transfer cash or assets from a traditional IRA directly to a qualified charity if you’re at least 70 ½ years old. Your donation does not count as taxable income, but it does count toward your minimum distribution for the year. The IRS caps the amount of annual QCDs, with the maximum for 2025 set at $108,000 per individual.

However, while you don’t pay taxes on this money, you also don’t keep the rest (as opposed to with a distribution, where you hold onto the after-tax portion of your withdrawal). That said, since this doesn’t count as taxable income at all, it can help keep your overall taxable income lower, which can help reduce the taxes you pay on other income and assets.

Make a Roth Conversion

Assets held in a Roth IRA are not subject to minimum distributions or taxes during the account owner’s lifetime. As a result, by converting pre-tax assets to a Roth IRA, you will eliminate your RMD requirements on the amount that you convert. You can convert eligible assets at any age and in any amount. The only significant restriction is that you cannot put RMD withdrawals into a Roth IRA.

In the year that you make a Roth conversion, you must pay income taxes on the full required amount that you convert. The typical approach to this is to stagger your conversions, which can reduce the tax hit in a given year. However, if you are currently concerned about RMDs, this will require striking a balance.

The more that you convert in a single year, the higher you will push your tax rates and the more you will pay in conversion taxes overall. However, the faster you convert your assets to a Roth portfolio, the less you will have to take in minimum distributions. Each year that you stagger your conversions is another year that you may need to take RMDs. Note that you do have to let any money that you’ve converted remain in the Roth IRA for at least five years before withdrawing it to avoid penalties (if you’re under age 59 ½).

All of this said, for many retirees, a Roth conversion will not help protect their money. When you make a Roth conversion, you withdraw money from your pre-tax portfolio and pay taxes on the amount taken out. If your goal is to avoid RMDs, which force you to withdraw money from your pre-tax portfolio and pay taxes on it, then a mid-retirement conversion may defeat the entire purpose. For many, this may be better used as a tool for future retirement planning instead.

Structure Your Distributions

A good way to manage your long-term RMD requirements is to structure your withdrawals across different accounts. Specifically, consider taking income from your pre-tax portfolios first. This will reduce the value of your portfolios subject to minimum distributions, allowing your other assets to maximize their growth in the early years of your retirement. For example, if you have both a 401(k) and a Roth IRA, take money from your 401(k) first, and take income from your Roth IRA later in retirement.

To maximize the value of this approach, consider starting to withdraw assets from your pre-tax portfolios at age 59 ½, the earliest you can generally do so without penalty. You can move those assets into a taxable portfolio, which is not subject to minimum distributions. Although as with Roth conversions, this is a tradeoff: You will reduce your long-term exposure to RMDs, but you will also sacrifice the tax-deferred growth those portfolios enjoy, potentially reducing your overall post-tax financial position.

Invest In Annuities

Another option to reduce RMDs is to restructure your investments around annuities. While this rule has some complications and exceptions, in general, you do not have to calculate minimum distributions for an annuity.

The income that your annuity generates is subject to income taxes unless it is part of a Roth portfolio. That income and the associated taxes will generally satisfy any RMD requirements for a pre-tax portfolio. This is not a hard-and-fast rule, but it will work for most households.

Bottom Line

Required minimum distributions are the amount that you must withdraw every year from pre-tax retirement accounts. While you cannot reduce your withdrawal requirements for the current year, you can restructure your RMD requirements for future years. Some options for doing so include making qualified charitable distributions or opting for a Roth conversion. Carefully structuring your distributions or restructuring your investments around annuities can also help.

Tips For Investing Around Your RMDs

This is a subject with a lot of different strategies and options. If you’re looking to manage your RMDs, our strategies here will help. And here are another six strategies for managing your minimum distributions long term.
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