I Turn 73 and My RMD Could Spike My Taxes-Here's the Plan I'm Using Instead

RMDs are a tax problem first, not just a cash problem

The mistake many retirees make is focusing on whether they can afford to take the money. The harder question is whether they can afford the tax bill. Once you reach age 73, the IRS requires minimum withdrawals from most traditional IRA and workplace plan balances, and those distributions count as taxable income. A withdrawal is not a left-pocket-to-right-pocket shuffle; it can change your tax picture.

Think of a tax-deferred retirement account like a pressure cooker. You can keep the lid on for years, but once you release the steam, it comes out all at once. If you time that release lazily, you may create a bigger problem than necessary.

The risk is not just a bill at tax time. A larger withdrawal can push your taxable income higher and reduce flexibility later in retirement. And if you think you can ignore the rule until it becomes obvious, the costs rise quickly. The IRS can charge a penalty equal to 25% of the amount not withdrawn, which may be reduced to 10% if corrected within two years. That is why I will not wait for the IRS to design my retirement plan for me.

I won't let RMDs control my retirement.

Know which accounts, deadlines, and exceptions actually apply

RMD rules target tax-deferred accounts

RMD rules apply to tax-deferred savings, not to every retirement account. They generally apply to 401(k)s and traditional IRAs, as well as 403(b), 457(b), SEP IRA, and SIMPLE IRA accounts. The main lifetime exception is the Roth IRA, which is exempt from RMDs. That is one reason many retirees keep a Roth as a source of later tax flexibility.

The April 1 deadline is where many people get tripped up

Your first IRA or workplace-plan RMD can generally be taken by April 1 of the year after you reach RMD age. Every later RMD must be taken by December 31. If you are still working after 73, a workplace plan may let you delay that first distribution until the year you retire, unless you are a 5% owner. Even when that exception applies, it usually covers only the plan tied to your current job.

That April 1 / December 31 mix-up is the real deadline risk. If you delay your first IRA RMD into the following year, you may still have to take that year's RMD by year-end too. In that case, two withdrawals can land in one calendar year. I do not want timing confusion to force more cash through my account than I planned.

My step-by-step plan for handling an RMD without losing control

Once the clock starts, my goal stops being "just get the withdrawal done." It becomes turning a forced distribution into a cash plan that still leaves me in control. I start that process early in the year so I can model the tax impact, compare options with a professional, and avoid a December scramble.

Step 1: Forecast the taxable income before moving the cash

I do not view the RMD only as a check to cash. I view it as income the IRS expects me to report. The rule is simple: withdrawals will be included in taxable income except for parts already taxed or otherwise allowed out tax-free. Before I move cash, I estimate where that extra income lands me.

I add the RMD to my other expected income and check whether it pushes me into a worse tax bracket, raises the taxable portion of Social Security, or narrows other tax-sensitive choices. If it does, I adjust the plan. I may still take the money, but I want to choose how, when, and why.

Step 2: Decide whether the RMD is spending money or just a portfolio turn

An RMD is not automatically "spending money." It is a forced withdrawal from the tax-deferred savings I built during my working years.

If my bills are covered elsewhere, I treat the RMD like a required portfolio turn, not a windfall. If I do need the cash for routine living costs, I plan that explicitly. The point is simple: I decide what the withdrawal is for instead of letting the account statement decide for me.

Step 3: Check whether the still-working workplace exception applies

Before I schedule anything, I verify whether a workplace plan may let me wait. If I'm still employed and do not own 5% or more of the business, I may be able to delay RMDs from that plan until the year I retire. But that exception usually applies only to the account tied to my current job, not to every retirement bucket I own.

Step 4: Act before year end

My guardrail is not December 31. It is the April 1 deadline for the first IRA RMD and the December 31 deadline for later yearly RMDs. By acting early, I avoid the classic trap of delaying the first RMD and then facing two withdrawals in one calendar year.

Step 5: Use a tax-aware distribution strategy

I sit down with a tax professional or investment adviser to see whether the cleanest move is one distribution or several, and whether any nontaxable portion can lower the hit. If charitable giving is already part of my plan, I also explore whether a qualified charitable distribution could help reduce the taxable income I want on paper.

Step 6: Keep outside cash available for taxes and emergencies

I keep cash accessible outside tax-deferred accounts. That way, an RMD is not my de facto rainy day fund, and my rainy day fund is not held hostage by RMD timing.

What success looks like

If the plan is working, the RMD is manageable rather than disruptive.

• The withdrawal happens before the April 1 or December 31 deadline, with no penalty risk.
• The cash has a job: either it covers living needs, or it moves outside tax-deferred accounts so it is not creating a forced sell-off just to pay the tax bill.
• The bigger tax picture stays manageable. The RMD is treated as included in taxable income, but I have already judged how that income fits into the rest of my tax situation.
• If I am still working, I have confirmed whether the delay-until-retirement exception applies or whether I should treat the account like every other tax-deferred bucket.

The plan fails if I take the withdrawal late, ignore the tax effect, or let deadlines make the decision. Success is not minimizing every dollar pulled out. It is making sure the IRS withdrawal does not make retirement more expensive than it needs to be.