How To Avoid RMD
To avoid or reduce Required Minimum Distributions (RMDs)—mandatory withdrawals from retirement accounts like traditional IRAs or 401(k)s starting at age 73 (or 75, depending on your birth year)—you can use strategic planning. While RMDs are mostly unavoidable for traditional retirement accounts, there are legal methods to defer, reduce, or bypass them.
✅ How to Avoid or Minimize RMDs
1. Use a Roth IRA
- Roth IRAs do not have RMDs during your lifetime.
- Convert funds from a traditional IRA to a Roth IRA through a Roth conversion.
- Be aware this is a taxable event, but can reduce future RMD burdens.
2. Work Past Age 73 (and Delay 401(k) RMDs)
- If you’re still working and don’t own more than 5% of your company, you can delay RMDs from your current employer’s 401(k) until you retire.
- Note: This doesn’t apply to IRAs or old 401(k)s.
3. Consolidate and Rollover Old 401(k)s
- RMDs apply to each traditional 401(k) you own. Rolling them into a traditional IRA can simplify withdrawals or set up conversions to a Roth.
4. Consider Qualified Charitable Distributions (QCDs)
- At age 70½+, you can give up to $100,000/year directly to charity from an IRA.
- This counts toward your RMD but is not taxed.
5. Reduce Your IRA/401(k) Balance Before RMDs Start
- Withdraw strategically before age 73, especially in lower tax years.
- This can reduce your future RMD amounts.
6. Annuities Inside IRAs (CAUTION)
- Some Qualified Longevity Annuity Contracts (QLACs) let you delay RMDs on a portion of your IRA until age 85.
- There are limits and rules, so get financial advice.
Summary Table
| Strategy | Benefit |
|---|---|
| Convert to Roth IRA | No RMDs during your lifetime |
| Work past RMD age with current 401(k) | Defers 401(k) RMDs |
| Qualified Charitable Distributions (QCDs) | Satisfies RMD without taxes |
| Withdraw early in low-tax years | Reduces future RMDs |
| Roll old 401(k)s into IRA or Roth | Easier to manage and plan withdrawals |
| Use QLAC for part of IRA | Delays RMD on that portion to age 85 |
⚠️ Note:
- Roth 401(k)s had RMDs before 2024, but RMDs are no longer required from them starting in 2024.
- Always consult a tax advisor or financial planner before doing Roth conversions or large withdrawals.