Required Minimum Distribution Strategies

Brett R. Henderson, CIMA®, CPFA®, CRPS®, CEPA®, AIF®, CLU®, BFA™ · Tax Planning

Required minimum distributions (RMDs) are annual withdrawals required from many retirement accounts. Starting ages depend on birth year and account rules. Planning may help manage taxes; savings depend on your circumstances.

Key Takeaways

A fiduciary financial advisor has a duty to act in your best interests when providing investment advice.

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✓ Financial planning is an ongoing process, not a one-time event
✓ Understanding your options helps you make informed decisions
✓ Professional guidance can help optimize your financial outcomes

RMD Basics

Starting age: 73 for birth years 1951-1958; 75 for 1960 or later. See page 5 for 1959.
Generally prior December 31 balance divided by the applicable IRS life-expectancy factor.
Generally taxable, except after-tax basis or other tax-free amounts.
Shortfall excise tax: generally 25%; 10% with timely correction and required filing.

Pre-RMD Strategies

Evaluate partial Roth conversions and their current tax cost.
Compare current withdrawals with possible future tax rates.
Planned withdrawals may lower future balances and RMDs, but can create current taxes.

Can I avoid RMDs?

Roth IRAs and Roth 401(k)s have no lifetime RMDs for the owner; beneficiary rules differ. Conversions do not remove RMDs on remaining traditional funds, and the year's RMD cannot be converted.

Written by Brett R. Henderson, CIMA®, CPFA®, CRPS®, CEPA®, AIF®, CLU®, BFA™. Hermosa Beach, California. Revised September 9, 2026.

Common Mistakes to Avoid

Mistake #1: Going it alone
Professional guidance can help avoid costly errors
Mistake #2: Not reviewing plans regularly
Financial situations change — plans should too
Mistake #3: Focusing only on returns
Risk management and tax efficiency matter equally

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This content is educational and is not personalized investment advice. Investing involves risk, including loss of principal. Past performance does not guarantee future results. Examples are hypothetical; individual results vary.

Neither Brett Henderson nor Vanderbilt Financial Group provides tax or legal advice. Please consult with your tax and/or legal advisors regarding your personal circumstances.

Brett R. Henderson is a registered representative of Vanderbilt Securities, LLC and investment advisor representative of Consolidated Portfolio Review. Securities offered through Vanderbilt Securities, LLC. Member FINRA, SIPC. Advisory Services offered through Consolidated Portfolio Review.

Primary source: IRS Publication 590-B. See page 5 for RMD dates, beneficiary rules and current qualifications.

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Primary Retirement Tax Sources

IRS guidance explains required distributions, taxable conversion amounts and qualified charitable distributions. Specific source links and qualifications appear on page 5.

Tax planning is not just about reducing your current tax bill - it can also help optimize your lifetime tax burden. Strategies such as Roth conversions, withdrawal sequencing, and tax-loss harvesting may help reduce taxes and preserve more of your retirement savings, depending on your individual circumstances.

How Do Different Strategies Compare?

Traditional IRA / 401(k): Withdrawals are generally taxable except for after-tax basis. RMD timing depends on birth year and account type; some current-employer plans permit deferral until retirement, with exceptions. Roth IRA / Roth 401(k): Qualified withdrawals are tax-free. Neither requires lifetime RMDs for the owner; beneficiary rules differ.

Taxable brokerage: Income and realized gains may be taxable; account withdrawals are not all taxed at capital-gains rates.

HSA: Qualified medical withdrawals are tax-free. Other withdrawals may be taxable and subject to additional tax. Withdrawal order depends on your circumstances; no sequence is best for everyone.

Frequently Asked Questions

How can I reduce my tax burden in retirement?

Strategies to consider include Roth conversions, tax-loss harvesting and withdrawals coordinated across account types. Potential tax benefits depend on your individual circumstances, applicable rules and costs. Consult your tax advisor before taking action.

Should I do a Roth conversion?

A conversion may fit your goals, but it creates taxable income to the extent converted funds have not already been taxed. Compare current and future tax costs, required distributions and beneficiary rules. Qualified Roth distributions are tax-free; no outcome is guaranteed.

What are the tax implications of Social Security benefits?

Up to 85% of Social Security benefits may be taxable depending on your combined income. Strategic planning around income sources can help minimize the tax impact on your Social Security benefits.

What Tax Planning Actions Should You Prioritize?

Effective tax planning requires proactive strategies implemented throughout the year, not just during tax season. Consider these priority actions:

Review your withholding and estimated payments: The IRS Tax Withholding Estimator can help you determine if your current withholding is appropriate to avoid surprises at tax time.
Evaluate Roth conversion opportunities: Compare current and potential future taxes. The taxable portion of a conversion is income; qualified Roth distributions are tax-free. Review the amount and withdrawal rules with your tax advisor.
Harvest tax losses: Tax-loss harvesting can be an effective strategy for potentially reducing taxes on investment gains in taxable accounts.
Review retirement contributions: Pre-tax workplace contributions may reduce taxable wages. IRA deductibility depends on eligibility, income and workplace-plan coverage. Roth contributions are not deductible.
Review charitable giving: Discuss whether bunching donations or using a donor-advised fund fits your goals. Deductibility depends on eligibility, limits and whether you itemize.

Effective tax planning can help individuals and families identify opportunities to reduce their tax burden and improve after-tax outcomes.

How to Create a Tax-Efficient Retirement Plan: Step-by-Step

Implementing a tax-smart strategy requires a systematic approach:

1. Step 1: Map your income sources. Identify all current and projected retirement income streams, including Social Security, pensions, 401(k)/IRA distributions, and taxable investment income.
2. Step 2: Estimate your future tax bracket. Project your retirement income to determine which federal and state tax brackets you will likely fall into, using resources from the IRS.
3. Step 3: Evaluate Roth conversions. Compare the taxable conversion amount, available funds to pay taxes and potential future tax treatment. Savings are not assured.
4. Step 4: Evaluate tax-loss harvesting. Review whether realizing investment losses fits your circumstances and applicable tax rules with your tax advisor.
5. Step 5: Plan withdrawals. Compare account tax treatment, required distributions, cash needs and other circumstances. There is no single withdrawal order appropriate for everyone.
6. Step 6: Review charitable options. Ask your tax advisor whether you qualify for a direct IRA-to-charity distribution and how its rules and limits apply to any required distribution.
7. Step 7: Review periodically with your advisors. Revisit your circumstances and tax rules. A review may identify changes to consider but cannot assure savings or prevent every mistake.

Tax-efficient retirement planning can potentially save taxes over your retirement, depending on your individual circumstances. Book your tax strategy session.

RMD Rules and Primary Sources Ages depend on birth year: 73 for 1951-1958; 75 for 1960 or later. IRS proposed regulations specify age 73 for 1959. Earlier birth years follow earlier starting-age rules; confirm your required beginning date. For IRAs, the first RMD may generally wait until April 1 of the following year; later annual RMDs are due December 31. Delaying the first can mean two taxable distributions in one year. Certain current-employer plans permit retirement deferral, except for 5% owners. Beneficiary rules depend on the account, relationship and owner's death. Some heirs must empty the account within ten years and also take annual RMDs. Do not apply the owner's starting-age rule to inherited accounts. At age 70 1/2 or older, qualifying direct IRA-to-charity transfers may count toward RMDs. The 2026 QCD exclusion limit is $111,000 per person, subject to eligibility and other limits; no deduction for excluded amounts. A missed RMD may qualify for a reduced 10% excise tax if corrected and reported within the correction window; reasonable-error waiver may be requested on Form 5329.

IRS Publication 590-B - distributions, beneficiary rules and QCDs

IRS RMD FAQs - account-specific deadlines and calculations

IRS RMD Regulations - birth-year rules and 1959 proposal Reviewed September 9, 2026; consult your tax advisor.