Skip the Penalty: 3 Smart Ways to Reduce or Eliminate RMDs Without Getting Burned

Required minimum distributions (RMDs) are the minimum amounts of money you must withdraw from your retirement accounts annually. Generally, you must start taking withdrawals from the following account types at age 73:

• Traditional IRAs
• SEP IRAs
• SIMPLE IRAs
• 401(k)s
• 403(b)s
• 457(b)s
• Small business qualified plans

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If you’re someone who worries about outliving your savings, you may be interested in ways you can avoid RMDs without that penalty. Here are three options worth considering.

1. Shift money into Roth accounts before RMD age

Roth IRAs are exempt from RMDs for life, so moving money from a traditional IRA or 401(k) into a Roth before RMDs begin can rid you of mandatory withdrawal rules. This move is most powerful during relatively low-income years, so that the conversion won’t push you into a higher tax bracket. For example, if you expect to bring in significantly less income in your early years of retirement, that may be a good time to consider making the shift.

However successful this strategy may be, it’s not without risks. For example, once you withdraw money from another account, you’ll owe taxes on those funds. If you take out too much, you might face Medicare IRMAA surcharges.

If you’re considering a shift into a Roth IRA, the best thing you can do is to meet with a financial or retirement advisor to ensure that you’re dotting your i’s and crossing your t’s.

2. Take advantage of qualified charitable distributions (QCDs)

If it’s time to take an RMD but you don’t need the money, a QCD is an IRS-sanctioned way to satisfy your RMD without paying taxes on the funds. The rules are clear: The donated funds can only come from an IRA, you must be at least age 70 1/2 to make a QCD, and the transfer must go straight from the IRA custodian to a qualified charity.

There are several benefits associated with QCDs:

• You avoid taxes: By donating at least as much as you’re required to withdraw from your retirement account, you don’t have to pay taxes on those funds.
• It’s a good-sized donation: For the tax year 2026, you can donate up to $111,000 to an eligible charity. If you’re married, you can donate up to $222,000.
• The move helps with future RMDs: The QCD reduces your IRA balance, helping minimize future RMDs.

3. Look into the “still-working exception”

If you’re still employed and don’t own more than 5% of the company you’re working for, you may be able to put off RMDs from your current employer’s 401(k) until you actually retire. While this exception does not apply to IRAs, it’s a good way to avoid being taxed on your current income as well as your RMD withdrawal.

There’s one potential hurdle to jump over. Your current plan’s administrator must formally elect to permit you to delay taking your RMD from your qualified plan account. So, if you’re interested, check with your plan administrator to ensure there won’t be a problem.

Whether you’re counting on RMDs to help finance your retirement dreams or dread the idea of withdrawing money, it’s good to know your options.

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