Required Minimum Distributions: Why Tax Planning Matters Before Year-End
November 6, 2026 | MacLean Capital Advisors
As year-end approaches, retirees face several important financial decisions. For those required to take distributions from traditional IRAs and other retirement accounts, one of the most significant is how to manage Required Minimum Distributions (RMDs).
While RMDs are often viewed as an annual obligation, they can also present an opportunity to evaluate retirement income, investment positioning, and tax considerations.
For individuals and families with substantial retirement assets, thoughtful RMD planning involves more than simply withdrawing the required amount before December 31.
Understanding Required Minimum Distributions
Required Minimum Distributions are mandatory withdrawals from certain tax-deferred retirement accounts, including traditional IRAs, SEP IRAs, SIMPLE IRAs, and many employer-sponsored retirement plans.
Under current law, individuals generally begin taking RMDs at age 73 if born between 1951 and 1959, or age 75 if born in 1960 or later.
Source: Internal Revenue Service, Internal Revenue Bulletin 2026-06, February 2, 2026, discussion of applicable ages under Internal Revenue Code §401(a)(9). IRS Bulletin 2026-06.
For most individuals already receiving RMDs, the annual deadline is December 31. Those taking their first RMD may have until April 1 of the following year, although delaying that first distribution can result in two taxable distributions in the same calendar year.
Source: Internal Revenue Service, Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs), Required Minimum Distributions section. IRS Publication 590-B.
The amount required each year is generally calculated using the prior December 31 account balance and an IRS life expectancy factor.
Roth IRAs and designated Roth accounts in employer plans are generally not subject to lifetime RMDs for their original owners, although different rules apply to inherited accounts.
How RMDs Can Affect Your Tax Situation
One of the most important considerations surrounding RMDs is their potential impact on taxable income.
Distributions from traditional retirement accounts are generally subject to ordinary income tax, except to the extent they represent previously taxed amounts.
For retirees with substantial retirement savings, these distributions may create additional tax-planning considerations, including:
Higher taxable income: RMDs may increase income enough to move a portion of earnings into a higher marginal tax bracket.
Medicare premiums: Higher income may result in increased Medicare Part B and Part D premiums in future years.
Social Security taxation: Additional retirement income may increase the taxable portion of Social Security benefits.
Investment-related taxes: Higher income may trigger an additional federal tax on certain investment income, including interest, dividends, and capital gains.
Because these considerations are interconnected, evaluating RMDs within the context of an overall financial plan can be particularly important.
An Example: A $2 Million Traditional IRA
Consider an investor who turns 75 in 2026 and had a traditional IRA balance of $2 million on December 31, 2025.
Using the IRS Uniform Lifetime Table, the applicable distribution factor at age 75 is 24.6.
$2,000,000 ÷ 24.6 = approximately $81,301
This investor would generally be required to withdraw approximately $81,301 during 2026, assuming the standard life expectancy table applies.
Source: Internal Revenue Service, Publication 590-B (2025), Appendix B, Table III — Uniform Lifetime Table. IRS Publication 590-B.
That distribution may be added to other taxable income, including Social Security benefits, pensions, investment income, and other retirement withdrawals.
For someone who does not need the full distribution to cover living expenses, the question becomes more complex: How should the distribution be coordinated with the rest of the portfolio and the individual's tax situation?
The answer depends on factors such as anticipated spending, existing cash reserves, investment allocation, charitable intentions, and long-term financial objectives.
Coordinating RMDs Across Multiple Retirement Accounts
Many retirees maintain several retirement accounts accumulated throughout their careers.
Traditional IRA owners generally calculate the required distribution for each IRA separately but may satisfy the combined amount by withdrawing funds from one or more of their traditional IRAs.
Employer-sponsored retirement plans, including most 401(k) plans, generally have separate distribution requirements.
This distinction creates an important planning consideration.
For example, an investor with multiple IRAs holding different investments may have flexibility in determining which IRA assets to distribute.
Rather than automatically selling investments across every account, it may be appropriate to evaluate the overall portfolio allocation, liquidity needs, and current market conditions.
In some circumstances, securities can also be distributed in kind to a taxable brokerage account rather than sold for cash. The distribution generally remains taxable, but the investor may avoid selling an investment solely to satisfy the withdrawal requirement.
Coordinating these decisions can help keep retirement distributions aligned with the investor's broader investment strategy.
Tax-Aware Strategies to Consider Before Year-End
Although RMDs cannot generally be avoided once required, several strategies may help retirees manage their broader financial impact.
1. Evaluate Qualified Charitable Distributions
For individuals age 70½ or older, a Qualified Charitable Distribution (QCD) may allow funds to be transferred directly from an eligible IRA to a qualifying charity.
When properly executed, a QCD can satisfy all or part of an IRA's required minimum distribution while generally excluding the qualifying amount from taxable income.
Source: Internal Revenue Service, Publication 590-B (2025), Qualified Charitable Distributions section. IRS Publication 590-B.
For charitably inclined retirees, this can be particularly valuable when coordinated with other income and tax considerations.
For additional information, see our October 2026 article, Understanding Qualified Charitable Distributions.
2. Review Tax Withholding
Retirees should consider whether federal and state income tax withholding on retirement distributions is appropriate.
Insufficient withholding may result in unexpected tax liabilities or estimated tax payment requirements.
Reviewing withholding before year-end can help identify potential shortfalls.
3. Coordinate Distributions With Portfolio Management
RMDs create an opportunity to review investment allocations and liquidity needs.
For example, distributions may be coordinated with portfolio rebalancing, cash reserves, or planned changes in investment exposure.
The objective is to avoid treating required withdrawals as isolated transactions when they may affect the broader investment portfolio.
4. Consider Longer-Term Roth Conversion Planning
For individuals who have not yet reached their required beginning date, Roth conversions may be worth evaluating as part of a multiyear tax strategy.
Converting a portion of traditional retirement assets to a Roth IRA may reduce future tax-deferred balances and potentially lower future RMDs.
However, Roth conversions generally create taxable income in the year of conversion, and the appropriate strategy depends on current and expected future tax circumstances.
Once RMDs begin, the required distribution itself cannot be converted to a Roth IRA. Any eligible conversion must be completed separately after satisfying the applicable RMD.
Source: Internal Revenue Service, Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs), Roth IRA Conversions — Required Distributions section. IRS Publication 590-A.
Looking Beyond the Current Tax Year
RMD planning should not end with meeting the annual withdrawal deadline.
Retirement distributions can influence long-term wealth preservation, estate planning, and the financial circumstances of surviving spouses and other beneficiaries.
For example, a surviving spouse may face a different tax situation when transitioning from married filing jointly to single filing status. Similarly, inherited retirement accounts can create significant income tax considerations for beneficiaries, particularly when distributions must occur within a limited period.
Evaluating these issues in advance may help families make more informed decisions about retirement income, charitable giving, Roth conversions, and beneficiary planning.
A Coordinated Approach to Retirement Income
At MacLean Capital Advisors, we believe retirement income planning should extend beyond meeting annual distribution requirements.
Our approach integrates personalized, tax-aware investment management with comprehensive financial planning, helping clients evaluate how retirement distributions fit within their broader financial picture.
Under the investment leadership of Christian A. MacLean, CFA®, CPA, we consider portfolio management, retirement income needs, tax implications, and long-term wealth objectives as interconnected parts of a coordinated strategy.
As the end of 2026 approaches, reviewing your required distributions alongside your broader financial plan may help identify opportunities to make more informed decisions for the years ahead.
Schedule a Conversation
If you would like to discuss how required minimum distributions fit into your retirement income and tax-aware investment strategy, we welcome the opportunity to connect.
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MacLean Capital Advisors
Indian Wells, California
www.macleancapital.com
Sources and References
Internal Revenue Service. Internal Revenue Bulletin 2026-06. February 2, 2026. Required Minimum Distributions, Applicable Ages. https://www.irs.gov/irb/2026-06_IRB
Internal Revenue Service. Publication 590-B (2025): Distributions from Individual Retirement Arrangements (IRAs). Required Minimum Distributions; Qualified Charitable Distributions; Appendix B, Uniform Lifetime Table. https://www.irs.gov/publications/p590b
Internal Revenue Service. Publication 590-A (2025): Contributions to Individual Retirement Arrangements (IRAs). Roth IRA Conversions, Required Distributions. https://www.irs.gov/publications/p590a
Important Disclosures
This article is provided for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. Tax laws and retirement distribution rules are complex and subject to change. Individual circumstances, account types, beneficiary designations, and applicable exceptions may affect the strategies discussed. Consult with your tax and legal professionals regarding your specific circumstances.
The example provided is hypothetical and for illustrative purposes only. It does not represent any actual client or guarantee a particular tax or investment outcome.