RMDs — the tax bill that finds you
Your 401k has a silent partner, and at age 73 the partner starts demanding checks — whether you need the money or not.
A Required Minimum Distribution (RMD) is the yearly withdrawal the IRS forces you to take from traditional (pre-tax) accounts starting at age 73. Every forced dollar is taxed as ordinary income. Big pre-tax balances mean big RMDs — and big RMDs can push you into higher brackets, raise your Medicare premiums, and tax more of your Social Security.
Why RMDs exist
Every dollar in a traditional 401k or IRA went in untaxed and has grown untaxed for decades. The deal was always "tax later" — RMDs are how the IRS makes sure later actually arrives. They're not a penalty; they're the bill for a very good deal you took in your 40s.
How the amount is calculated
Each year, take your pre-tax balance on December 31 of last year and divide it by a life-expectancy factor from the IRS Uniform Lifetime Table. The factor shrinks as you age, so the percentage you must withdraw grows every year.
| Age | Divisor | Forced withdrawal on $1M |
|---|---|---|
| 73 | 26.5 | ~$37,700 (≈3.8%) |
| 80 | 20.2 | ~$49,500 (≈5.0%) |
| 90 | 12.2 | ~$82,000 (≈8.2%) |
Notice the shape of the problem: if your balance keeps growing through your 70s, the balance and the percentage rise together — that's how retirees who never felt rich end up in higher brackets at 85 than they were at 65.
The three-way squeeze
- Bracket creep — RMDs stack on top of Social Security and any pension; the total can climb into brackets you thought you'd left behind at retirement.
- IRMAA — Medicare premium surcharges kick in above income thresholds. Cross one and both spouses' Part B and D premiums jump — potentially hundreds of dollars a month. And a single dollar over a threshold triggers the whole tier.
- Social Security taxation — higher income makes a larger share of your Social Security benefit taxable, an effect that quietly compounds the other two.
Example: A couple retires at 65 with $1.6M pre-tax, spending mostly from brokerage savings. They feel pleasantly low-tax for years. At 73, the IRA — now $2.1M — forces out ~$79K. Stacked on $60K of Social Security, they're deep in the 24% bracket and over an IRMAA threshold, paying more tax at 74 than they did while working. None of it was a surprise to the math — only to them.
The defusing levers (used a decade early)
Almost everything that softens RMDs happens before 73:
- Roth conversions in the low-income years — every converted dollar leaves the RMD calculation forever. This is the primary lever.
- Spending pre-tax money earlier in your withdrawal order than the naive default suggests.
- After 70½, qualified charitable distributions can send IRA dollars straight to charity, satisfying the RMD without touching your taxable income (worth raising with a tax professional if you give anyway).
What Vundii shows you
- The RMDs page projects your forced withdrawals year by year, flags the ages where they'd cross IRMAA thresholds, and shows how the picture changes as your plan changes.
- The Tax Planning page's Roth Optimizer is the countermeasure — it exists specifically to shrink the balance your RMDs will be computed from.
- The Decumulation Analysis tax chart makes the squeeze visible: watch the traditional-first strategy's tax line spike right at 73.
What to do about it
- Look at your projected RMD curve now — even if 73 is twenty years away. The size of the future problem determines how aggressive today's response should be.
- If the curve crosses IRMAA lines or jumps brackets, run the Roth Optimizer and compare lifetime outcomes.
- Revisit annually — market growth quietly regrows the problem, and each passing year shortens the conversion window.
Related terms: RMD · IRMAA · bracket creep · Roth conversion
See your own RMD curve — before it sees you.
Try it in Vundii →