RMD Changes & Withdrawal Planning for Affluent Households

You’ve worked hard to build a retirement portfolio that supports your lifestyle and legacy goals. As you approach the age when required minimum distributions (RMDs) begin, the rules have evolved again under the SECURE and SECURE 2.0 Acts.

For high-income households and seasoned investors, understanding these updated RMD rules is essential — especially how they interact with income taxes, Medicare premiums, and long-term estate and charitable planning.

Note: This article summarizes U.S. federal rules in effect as of 2025. Future legislation, IRS guidance, and state or local tax rules could change some of these provisions.

What Is an RMD?

A Required Minimum Distribution (RMD) is the annual withdrawal the IRS generally requires from tax-deferred retirement accounts — including traditional IRAs, SEP IRAs, SIMPLE IRAs, and most employer plans such as 401(k) and 403(b) accounts — once you reach a specified starting age.

Key points:

• RMDs are usually taxed as ordinary income for federal tax purposes.
• The IRS uses life-expectancy tables and your prior year-end account balance to determine the minimum amount.
• RMDs exist to ensure that tax-deferred dollars eventually become taxable, limiting how long these accounts can operate as sheltered vehicles.

What’s New: RMD Rules After SECURE 2.0

When do I have to begin taking RMDs under current law?

Under SECURE 2.0, the RMD starting age increased in stages:

• Previously: 70½ (under older rules), then 72 (under the original SECURE Act).
• Now: For most individuals, the RMD age is 73.
• Scheduled change: The starting age is currently scheduled to rise to 75 beginning in 2033, generally affecting those born in 1960 or later.

In practice, your first RMD is due by April 1 of the year after you reach your applicable RMD age (73 under current rules). Subsequent RMDs must be taken by December 31 each year.

Because the rules can be nuanced, especially if you have multiple accounts or employer plans, it’s important to confirm your exact RMD age and schedule with your advisor and tax professional.

Roth RMD rules remain favorable

• Roth IRAs owned by the original account holder continue to have no lifetime RMDs.
• Under SECURE 2.0, Roth 401(k), Roth 403(b), and similar designated Roth accounts in employer plans are no longer subject to lifetime RMDs for the account owner starting in 2024, aligning them more closely with Roth IRAs.

Beneficiaries of inherited Roth IRAs or Roth employer accounts may still be subject to distribution requirements, depending on their status and the applicable rules.

If you delay your first RMD

You can delay your first RMD until April 1 of the year following the year you reach your required beginning age. However, that can mean two RMDs in one calendar year (the delayed first RMD plus the current year’s RMD), which may:

• Increase your marginal tax rate
• Affect Social Security taxation
• Trigger higher Medicare Part B and Part D premiums (IRMAA surcharges)

Planning consideration: As you approach your RMD age, it’s worth modeling whether taking your first RMD in the year you reach the age — rather than delaying into the following year — better aligns with your tax and cash-flow goals.

Tax-Sensitive RMD Planning Considerations for Affluent Households

Q: How can affluent households manage RMDs while trying to control taxes and Medicare premiums?

A: There is no one-size-fits-all answer. However, strategies such as timely Roth conversions, staged withdrawals, and thoughtful charitable giving may help some households manage the long-term tax impact of RMDs when coordinated with a broader plan.

1. Use partial Roth conversions before RMD age

In your 60s or early 70s — particularly in years when income is temporarily lower — converting a portion of pre-tax assets to a Roth IRA can:

• Potentially reduce the size of future RMDs by shifting funds into a Roth account that has no lifetime RMDs for the original owner.
• Spread taxable income more evenly across multiple years instead of concentrating it in later life.
• Help manage exposure to possible future tax-rate increases by paying tax at today’s known rates.

This can be especially relevant for households with high net worth and large tax-deferred balances, but the net benefit depends heavily on:

• Your current versus projected future tax brackets
• Estate and charitable objectives
• State and local tax rules
• How long the assets are expected to remain invested

Important detail: RMD amounts themselves generally cannot be converted to a Roth; RMDs typically must be taken before any additional conversions in that year.

Because Roth conversion decisions are highly sensitive to assumptions, they should be modeled carefully with your financial advisor and tax professional.

2. Consider staged withdrawals to avoid income spikes

Rather than waiting until RMD age and then taking only the minimum, some households consider staged, voluntary withdrawals in earlier years to smooth income over time. In the right circumstances, this may help:

• Keep marginal tax rates more consistent
• Reduce the likelihood of crossing higher IRMAA brackets for Medicare Part B and D
• Limit the impact of income-based phaseouts tied to adjusted gross income (AGI)

The potential advantage depends on:

• The timing of Social Security benefits
• The mix of tax-deferred, taxable, and tax-free accounts
• Future spending plans and legacy goals

This approach should be weighed against the benefits of keeping assets in tax-deferred accounts longer.

3. Use Qualified Charitable Distributions (QCDs) to manage AGI

For charitably inclined investors, Qualified Charitable Distributions (QCDs) can be a powerful tool.

A QCD is a direct transfer from an IRA to a qualified 501(c)(3) charity that:

• Is available to eligible IRA owners and certain beneficiaries age 70½ or older.
• Can be excluded from taxable income if all IRS rules are met.
• Can count toward your RMD for the year.

Because a properly executed QCD is generally not included in AGI, it may:

• Help mitigate Medicare surcharges and income-based phaseouts
• Provide a more tax-efficient way to support charities compared with taking a taxable distribution and then donating cash
• Be appealing for taxpayers who take the standard deduction and might not otherwise receive a tax benefit from itemized charitable deductions

Planning tip: If you are charitably inclined and eligible to use QCDs, consider making the QCD before taking any additional RMD-related withdrawals. A lower AGI may have knock-on benefits across your tax picture, depending on your circumstances.

Qualified Charitable Distributions (QCDs): Key Details for 2025

Q: Who qualifies for QCDs, and what are the 2025 limits?

As of the 2025 tax year:

• You must generally be at least age 70½ on the date of the distribution.
• The annual QCD limit is $108,000 per individual in 2025, indexed for inflation (up from $105,000 in 2024).
• Married couples filing jointly can each make QCDs from their own IRAs up to the individual limit, for a potential combined maximum of $216,000, subject to IRS rules.
• QCDs must be transferred directly from the IRA custodian to a qualified public charity.

QCDs cannot be directed to:

• Donor-advised funds
• Private foundations
• Certain supporting organizations or charities that provide more than incidental benefits to the donor or family members

Implementation tip: Coordinate carefully with your IRA custodian and tax advisor to ensure QCDs are coded and reported correctly on Forms 1099-R and your tax return, especially in years when you are also taking other withdrawals or performing Roth conversions.

Conclusion

The SECURE and SECURE 2.0 Acts have reshaped RMD timing, Roth treatment, and charitable giving options. For affluent households, these changes create both risks and planning opportunities:

• A higher RMD age provides a longer window to consider Roth conversions and voluntary withdrawals.
• The elimination of lifetime RMDs on Roth employer accounts and the inflation-indexed QCD limit expand the toolkit for tax-sensitive planning.

However, the optimal strategy is highly specific to your:

• Income sources and timing
• Portfolio mix (tax-deferred, taxable, Roth)
• Health care costs and Medicare considerations
• Estate, legacy, and charitable objectives

If you’re nearing retirement age or already drawing from your accounts, this is an appropriate time to revisit your plan with qualified professionals.

Our role: If you choose to work with us, our team at Watts Gwilliam & Company, LLC can help you evaluate and implement a comprehensive retirement-income strategy that incorporates RMD rules alongside your broader investment, tax, and estate-planning objectives, in coordination with your tax and legal advisors. As a fiduciary Registered Investment Advisor, we are obligated to put clients’ interests first and to disclose material conflicts of interest.

Required Minimum Distribution (RMD) FAQ

Q: Can I skip an RMD if I don’t need the money?

Generally, no. Once you reach your required beginning age (currently 73 for most individuals under SECURE 2.0, with a scheduled increase to 75 in 2033), you must take at least the required minimum amount each year from applicable accounts, even if you don’t need the cash flow.

Failing to take an RMD can result in an excise tax on the shortfall, although SECURE 2.0 reduced this penalty if corrected in a timely manner.

Q: Does a QCD reduce my taxable income?

A properly executed QCD that meets IRS requirements is generally excluded from taxable income and can be applied toward your RMD for the year. However, the exact impact on your federal and state tax liability — including potential effects on Medicare premiums and deductions — depends on your overall situation. You should review potential QCDs with your tax advisor.

Q: Are Roth IRAs subject to RMDs under these rules?

• Roth IRAs owned by the original account holder are not subject to lifetime RMDs under current law.
• Roth assets in employer plans (such as Roth 401(k)s and 403(b)s) no longer require lifetime RMDs for the owner beginning in 2024, bringing them in line with Roth IRAs.
• Beneficiaries of inherited Roth accounts may still be subject to distribution rules based on their relationship to the original owner and the applicable regulations.

Q: Did the “One Big Beautiful Bill Act” change RMD rules?

No. The One Big Beautiful Bill Act of 2025 made broad tax and spending changes but did not alter the SECURE/SECURE 2.0 rules that govern when RMDs start — RMD age remains 73 now, scheduled to rise to 75 in 2033. Its impact on RMD planning is indirect, by changing deductions, brackets, and senior-focused provisions that can affect the tax rate you pay on RMD income rather than the RMD requirements themselves.

Important Disclosures

• This material is provided for informational and educational purposes only and does not constitute financial, investment, tax, or legal advice, nor an offer to sell or a solicitation of an offer to buy any security or investment strategy.
• The information reflects our understanding of U.S. federal rules in effect as of 2025 and may change without notice due to new legislation, regulations, or interpretations. State and local tax laws may differ.
• Investment strategies involve risk, including the possible loss of principal, and may not be suitable for every investor. Past performance is no guarantee of future results.
• Any examples, projections, or scenarios are for illustration only and do not guarantee any specific outcome or return.
• You should consult your own financial advisor, tax professional, and attorney regarding your specific objectives, financial situation, and needs before implementing any strategy described here.
• Reading this article does not create an advisory relationship with Watts Gwilliam & Company, LLC. An advisory relationship is established only through a signed agreement describing our services and applicable fees.
• Watts Gwilliam & Company, LLC is a Registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training.