A Required Minimum Distribution (RMD) is a mandatory annual withdrawal from most tax-deferred retirement accounts: traditional IRAs, SEP-IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b) plans. The IRS requires you to begin taking these withdrawals at a specific age, and every dollar you withdraw is taxable as ordinary income at the federal level — and, in Arizona, at the state level as well.

The reason RMDs exist is simple. When you contributed to a pre-tax retirement account, you took an income tax deduction in the year of the contribution. The IRS allowed your investments to grow tax-deferred for decades. RMDs are the federal government's mechanism for ensuring those deferred taxes eventually get paid. Without RMDs, a pre-tax balance could compound for the rest of your life and never be taxed at all — which is not what the IRS signed up for.

Under current law (SECURE 2.0, enacted at the end of 2022), RMDs begin at:

• Age 73 — for retirees born between 1951 and 1959.
• Age 75 — for retirees born in 1960 or later (takes effect in 2033).

The first RMD must be taken by April 1 of the year after you reach the applicable age. Every subsequent RMD must be taken by December 31. Most people delay the first one — and discover that doing so forces two RMDs into a single tax year, which is almost always the wrong move. We'll come back to that in the mistakes section.

What does not require RMDs during the owner's lifetime: Roth IRAs, and (as of 2024) Roth 401(k)s. This is one of the structural reasons Roth conversions deserve serious attention before age 73 — the converted dollars permanently leave the RMD system.

The formula is straightforward. Each year, you take the December 31 balance of each tax-deferred account from the prior year and divide it by an IRS life expectancy factor from the Uniform Lifetime Table.

The factor at age 73 is 26.5. That means your first RMD is roughly 1 ÷ 26.5 = 3.77% of your prior-year balance. The factor decreases each year, so the percentage withdrawn rises gradually:

• Age 73: factor 26.5 → ~3.77%
• Age 75: factor 24.6 → ~4.07%
• Age 80: factor 20.2 → ~4.95%
• Age 85: factor 16.0 → ~6.25%
• Age 90: factor 12.2 → ~8.20%
• Age 95: factor 8.9 → ~11.24%

Two implications fall out of that table that surprise most people:

1. RMDs grow as a percentage, not just as a dollar amount. Even if your portfolio doesn't grow at all, you'll be required to withdraw a larger share of it each year.
2. RMDs grow in absolute dollars too, because in most cases your portfolio does grow. A balance that compounds at, say, 5% net of withdrawals will produce RMDs that rise — sometimes meaningfully — across your 70s and 80s.

If you have multiple traditional IRAs, you calculate the RMD separately for each one but can take the total from any combination of them. 401(k)s, 403(b)s, and other employer plans work differently — each plan's RMD must come from that plan specifically. This matters when you're deciding whether to consolidate accounts before age 73.

To estimate the all-in cost of an RMD for a typical Arizona retiree, three layers of tax need to be considered together:

1. Federal ordinary income tax — taxed at your marginal rate (10%, 12%, 22%, 24%, 32%, 35%, or 37% in 2026 brackets).
2. Arizona state income tax — flat 2.5% on the full distribution.
3. Indirect costs triggered by the distribution — additional Social Security taxation, IRMAA Medicare surcharges, and the loss of certain deductions or credits at higher MAGI.

The third layer is what most retirees miss. The headline tax rate on a marginal RMD dollar might be 24% federal + 2.5% Arizona = 26.5%. But once you factor in the additional 0–85% of your Social Security that becomes taxable as your provisional income rises, the effective marginal rate on that same dollar can be 35% or higher. This is the "tax torpedo" that Social Security planners refer to.

The 2026 IRMAA brackets begin at MAGI above $106,000 for single filers and $212,000 for married filing jointly. Each bracket is a cliff: cross by a single dollar and the surcharge applies to the entire Part B and Part D premium for the year. There is no gradual phase-in. A married couple at the third IRMAA tier will pay roughly $9,000+ per year above the standard premium combined.

This is the part of RMD planning that gets the least attention — and causes the most regret. When the first spouse dies, the household typically loses one Social Security check, but the underlying portfolio largely stays intact, and any RMD obligations don't go away. The surviving spouse continues filing for the year of death as married jointly, then files single thereafter. That single change has substantial consequences:

• Federal brackets compress. The 22% bracket for single filers ends at roughly half the joint level. Income that was previously taxed at 22% can land in the 24% or 32% bracket as a single filer.
• IRMAA brackets compress. The first surcharge tier hits at $106,000 for single vs. $212,000 for joint. Many surviving spouses move into IRMAA on income that didn't trigger it before.
• Standard deduction roughly halves. More of every dollar becomes taxable.
• Social Security taxability rises. The combined income thresholds for taxing Social Security are dramatically lower for single filers than for joint.

The household income may drop by $30K–$50K when one spouse dies, but the tax bill on the remaining income often goes up — sometimes meaningfully. This is why planning for the surviving spouse before either spouse dies is a core component of RMD strategy. Roth conversions during the joint-filing years permanently reduce the RMD burden the survivor will face. QCDs become more valuable. Beneficiary designations need to be reviewed with the survivor's tax position in mind, not just the current household's.

QCDs are underused. The mechanics are simple, the tax efficiency is unusually high, and they're available to everyone 70½ or older with an IRA — which now includes a meaningful percentage of your charitable giving years before RMDs even begin.

• Eligibility: Age 70½ or older with a traditional IRA (or inherited IRA, in some cases).
• Annual limit: $108,000 per person in 2025 (indexed annually).
• Direct transfer: The funds must move directly from the IRA custodian to a qualified 501(c)(3) public charity. If the check is made out to you and you forward it, it's no longer a QCD.
• RMD credit: The QCD counts toward your RMD up to the QCD amount — meaning a $40,000 QCD reduces a $50,000 RMD to $10,000 of taxable distribution.
• AGI exclusion: The QCD is excluded from AGI entirely. This is what makes it more efficient than taking a distribution and itemizing the charitable deduction — most retirees don't itemize anymore (the standard deduction is too high), so the donation deduction would otherwise produce zero tax benefit.
• SECURE 2.0 enhancement: A one-time $54,000 (2025) QCD can now be made to a qualifying charitable gift annuity or charitable remainder trust, providing a lifetime income stream while still satisfying the QCD treatment.

If you're already donating to a church, alma mater, food bank, or any other 501(c)(3), the question isn't whether to use QCDs — it's why you haven't already.

The SECURE Act of 2019 fundamentally changed what an inherited IRA means for non-spouse beneficiaries. The old "stretch IRA" — where a child or grandchild could spread distributions across their own life expectancy, often turning a $1M IRA into decades of tax-deferred growth — was eliminated for most beneficiaries.

• 10-year rule: Most non-spouse beneficiaries must fully distribute the inherited IRA by December 31 of the tenth year following the original owner's death.
• Annual RMDs during the 10 years: If the original owner had already begun RMDs at death, the beneficiary generally must continue annual RMDs during years 1–9 and clear the balance in year 10. (The IRS waived the annual-RMD-during-the-10-years requirement for 2021–2024 while guidance was finalized; from 2025 onward it applies.)
• Eligible designated beneficiaries (EDBs): Surviving spouses, minor children of the decedent, disabled or chronically ill beneficiaries, and beneficiaries less than 10 years younger than the decedent — these can still use a modified life-expectancy stretch.
• Spousal beneficiaries: Have the option to roll the inherited IRA into their own IRA, which generally produces the best tax outcome.

The implication for Arizona retirees with significant pre-tax balances is that leaving a large traditional IRA to a working-age adult child often forces that child to recognize tens or hundreds of thousands of additional taxable income during their highest earning years — at federal rates that can hit 32%, 35%, or 37%. Roth conversions before death turn that liability into a tax-free inheritance instead. This is one of the strongest cases for Roth conversion strategy at the higher end of the wealth spectrum.

1. Delaying the first RMD to April 1 of the next year. Technically allowed, almost always wrong. It forces two RMDs into a single tax year, almost guaranteeing a higher bracket and potentially an IRMAA cliff. Take the first RMD in the year you turn 73.
2. Missing the deadline entirely. The 25% excise tax (10% if corrected within two years) applies to the shortfall. This is one of the most expensive simple-mistake penalties in the code.
3. Treating each plan's RMD interchangeably. 401(k) RMDs must come from that 401(k). You can't take a 401(k) RMD from your IRA. Aggregation only works among IRAs.
4. Not using QCDs because "they're only for rich people who give a lot to charity." Even a $5,000 QCD provides AGI-level tax benefits that an itemized donation deduction would not.
5. Setting up automatic monthly RMD withdrawals without modeling the tax year. Automatic distributions are convenient but can lock in suboptimal tax outcomes. Most custodians let you take an RMD as a single year-end transaction once your tax picture is clear.
6. Forgetting that Roth conversions are taxable today. A conversion looks like an RMD-reduction strategy on paper, but in the year of the conversion it adds to AGI and therefore can create the same IRMAA, Social Security taxability, and bracket problems an RMD does. The point is to do it earlier, in lower brackets — not to do it carelessly.
7. Ignoring the surviving-spouse outcome. Models that show RMDs over a couple's joint lifetime miss the single-filing tax cliff that almost always arrives at some point. The earliest survivor outcome should be planned for now, not after.

Consider a Scottsdale couple — David and Patricia, both 68 — who retired last year. Combined retirement assets: $2.3M in traditional IRAs, $300K in a brokerage account, and $200K in Roth IRAs. Both delayed Social Security to 70. Their cash needs in retirement: roughly $9,000/month, partly funded by drawing from the brokerage account, partly from a small pension.

Without intervention: at age 73, with a projected balance of $2.6M (assuming a 5% net growth rate), their first-year combined RMD will be roughly $98,000. Stacked on top of $80,000 of joint Social Security and a $30,000 pension, that's a $208,000 gross income year, landing them in the 24% federal bracket and triggering IRMAA Tier 1. Five years later, with portfolio growth and a declining factor, the RMD alone is $135,000 — and IRMAA Tier 2 is now in play.

What changes with a five-year conversion plan? Modeling against 2026 brackets and IRMAA tiers, a conversion of roughly $90,000 per year for five years (filling the 22% bracket up to but not over IRMAA Tier 1) reduces the projected RMD-start balance from $2.6M to roughly $1.7M. That brings the first RMD down from $98,000 to about $64,000 — staying entirely below IRMAA Tier 1, materially reducing the federal-bracket exposure, and saving Arizona state tax on a substantially smaller lifetime distribution stream.

The headline number across the projection: roughly $180,000 in lifetime federal + Arizona tax savings, plus another $40,000–$60,000 in IRMAA premium savings, depending on longevity assumptions. Roughly $220,000 in total — produced by working the math five years before RMDs even start.

This case is illustrative and based on the kind of analysis that runs in a typical Strategic Fit Interview. The actual numbers depend on the client's exact balances, brackets, location, and longevity assumptions.