One strategic move could help you pay less to the IRS.
IRS increases 401(k) contribution limits for 2026
The IRS will increase 401(k) and catch-up contribution limits for 2026, allowing workers to save up to $32,500 for retirement.
If you’ve nestled in a traditional IRA or 401(k), turning 73 can be a financial milestone that many retirees want to avoid: their first required minimum distribution (RMD). Not only will an RMD force you to take money out of your savings, but depending on its size, it can easily result in a hefty IRS bill.
Fortunately, your first RMD gives you flexibility. The bad news is that taking advantage of that flexibility can actually lead to tax problems.
Why the timing of your first RMD matters
RMDs are due by December 31st of each year. However, there is an exception in the first case.
You can defer your first RMD until April 1 of the year after you turn 73. And at first it may seem worth it, since you can let your money grow for a little longer, excluding taxes.
But there’s a big catch. If you postpone your first RMD until April of the following year, you must also take your second RMD by December 31 of the same year. This means you’ll have two taxable withdrawals in a calendar year, potentially resulting in higher taxes.
Not only that, but if your income increases significantly because of these two RMDs, there could be other consequences. For example, you may have to pay taxes on your Social Security benefits. Also, if your RMD is large enough, your income could jump to the point where it adds up to your Medicare Part B premiums.
The smart way to get your first RMD
Rather than thinking it’s best to delay taking your first RMD, you may want to consider taking it in the year you turn 73. Doing so could help you avoid a tax hit next year, not to mention less obvious consequences like taxed Social Security and expensive Medicare premiums.
Of course, if you don’t like the idea of having to take RMDs, you can also try performing a Roth conversion before initiating mandatory withdrawals. But converting a Roth also requires strategic timing.
Making a large conversion in a single year can have the same effect as having to pay two RMDs: huge taxes, Social Security taxes, and Medicare surcharges.
If you are affected by RMDs, you should manage them carefully in your retirement. And it starts with the first timing. Although it may be tempting to delay taking your first RMD, from a tax perspective, taking it in the year you turn 73 may be a better idea.
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