The Tax Trap Hiding in Your RMDs

At some point, the government makes you take money out of your retirement accounts.

This is called a Required Minimum Distribution, or RMD.

For most folks it starts at 73. But if you were born in 1960 or later, it starts at 75.

Either way, you cannot skip it. The penalty for missing it is steep.

Here is what catches people off guard.

That withdrawal counts as income. And more income does more than raise your tax bill.

It can push you into a higher tax bracket.

It can make more of your Social Security taxable.

It can even raise your Medicare premiums two years later.

So one withdrawal can cost you three different ways.

The good news is you have more control than you think.

The years between retirement and your RMD age are often your lowest income years.

That window may be a chance to move money out on your own terms, at lower tax rates, before the government forces your hand.

There is one more reason to act soon.

Right now seniors get an extra tax deduction on top of the standard one. But that bonus deduction is set to expire at the end of 2028.

For the next few years, that means you may be able to pull money out, or do a Roth conversion, at an even lower cost.

Once 2028 passes, that extra cushion goes away.