TRANSCRIPT
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#92 - Required Minimum Distributions (RMD) Explained: Risks, Timing, and Tax Planning Strategies
Eric Blake: Welcome to another episode of the Simply Retirement Podcast. I am your host, Eric Blake, practicing retirement planner with over 25 years of experience, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life. Joining me again on today’s episode is Wendy McConnell.
Wendy, how are you?
Wendy McConnell: I'm good. Thanks for having me.
Eric Blake: Absolutely. I'm glad you're here. As we were just talking about before we got started, surviving Snowmageddon 2026 here in the Dallas area. Still have some ice on the ground. I actually finally got out to play a little pickleball this morning and had to be very, very careful on the way to the car.
Wendy McConnell: Yeah. I'm assuming you played indoors.
Eric Blake: I did, yes. Yes, yes.
Wendy McConnell: Yeah, I forgot you played.
Eric Blake: Yeah, so I try to get out there two or three times a week.
Wendy McConnell: Good for you.
Eric Blake: As best I can. So I try to mix that in with some trips to the gym as well, of course. But yeah, got to at least get a couple of pickleball sessions in each week.
Wendy McConnell: Yes, I know. It's a bad addiction, but you know, someone’s got to have it.
Eric Blake: There are worse addictions.
Wendy McConnell: I agree 100%.
Eric Blake: I always like the videos you see online on Instagram or whatever it is about your first time playing pickleball and you’re just kind of going out there for fun. Then by the next couple of videos, you’ve got all the gear on — glasses, pads, knee braces.
Wendy McConnell: It is so funny. And people make fun of you, but I don’t care. I really don’t.
Eric Blake: That’s right.
Wendy McConnell: It’s too much fun. But we’re not going to talk about pickleball all day, are we?
Eric Blake: Unfortunately, we’re not going to do an episode on pickleball. Maybe we need to at some point in the future, but today’s episode we’re actually going to be talking about required minimum distributions. Some people may hear them as RMDs.
We’ll talk about what they are, when they begin, how the rules have changed over the last few years, and of course why they matter once they do apply. But most importantly, we’re going to talk about some strategies you might be able to utilize to minimize the impact.
Actually, in our last episode we talked about the retirement contribution limits for 2026 and how to think about which accounts to fund first and prioritize those accounts. So today’s conversation is kind of that next chapter of that discussion — thinking about how the choices you make while you’re saving can have a big impact later on when it’s time to start taking that money out.
I would say quite honestly required minimum distributions are one of the clearest examples we have of how planning during your working years actually has a pretty big impact on your retirement years.
As a firm, we just sent out what we call our RMD letters to clients who are required to take a distribution this year. Those letters confirm what the required amount is for the year and make sure nothing gets missed — and we’ll talk about why that’s important here in just a bit.
I also want to highlight why we send those out now in January instead of later in the year. January gives us time — time to plan, time to look at taxes and projections, and time to decide how these distributions fit into the bigger picture instead of rushing into decisions at year-end.
Wendy McConnell: Okay.
Eric Blake: Along with that RMD letter we also include a helpful checklist called What Issues Should I Consider When Reviewing My RMDs? We’re actually going to make that same checklist available to our audience today. You can get a copy if you go to simplyretirementpodcast.com/rmd and explore these ideas and strategies if you are subject to RMDs or may be in the next few years.
Wendy McConnell: Lots of goodies.
Eric Blake: Lots of goodies. Lots of good stuff.
So first let’s talk about what a required minimum distribution is. Basically it is a minimum amount the IRS requires you to take out each year once the account owner reaches a certain age.
Wendy McConnell: Now these are your 401(k)s? Any money that has been tax-deferred?
Eric Blake: Right. If you got a tax break when you put the money in, most likely you’re going to have a required distribution at some point down the road. So 401(k)s, 403(b)s, traditional IRAs — any pre-tax account. It saved you taxes going in, it will be taxable coming out, and there will most likely be an RMD.
Wendy McConnell: Okay.
Eric Blake: Once RMDs begin, the question isn’t really if you’ll pay tax — it’s when and how much.
Now before we go further, it’s important to talk about what happens if RMDs are missed. Under today’s rules, if an RMD is not taken the IRS can assess a penalty of up to 25% of the amount that should have been withdrawn.
Wendy McConnell: Okay. Ouch.
Eric Blake: If it’s a mistake and you fix it quickly, they may reduce it to 10%. For perspective, before SECURE Act 2.0 the penalty was as much as 50%.
We’ve even seen situations — not a client of ours but a client’s elderly parent — she had an old 403(b) from her teaching career and didn’t realize she needed to take distributions. She was 94 at the time. That was about 24 years of missed RMDs. By the time it came to light, penalties could have eaten up a large portion of the account.
You can request exceptions and go to the IRS, but if you think you’re in that situation talk to your tax advisor as soon as possible.
Wendy McConnell: So is it a percentage you’re required to take or a specific amount?
Eric Blake: There are lifetime tables. Most people use the same table, with slight differences depending on marital status. The intent is to deplete the account over life expectancy. The divisor gets smaller each year, which forces a larger percentage out annually.
Wendy McConnell: So if my first year is $10,000, that increases each year?
Eric Blake: Yes, because the divisor shrinks.
Wendy McConnell: Okay, got it.
Eric Blake: Now let’s talk ages because the rules have changed a lot. For years it was 70½. Then the original SECURE Act changed it to 72. SECURE Act 2.0 pushed it further.
If born before 1960, RMDs begin at 73. If born 1960 or later, they begin at 75.
There’s also the required beginning date — April 1 of the year after you turn 73. But that April 1 rule only applies to the first year. After that, every RMD is due by December 31 each year. If you delay the first one, you must take two in the second year.
Wendy McConnell: Not confusing at all.
Eric Blake: Here’s a real example: a married couple both age 73 and still working with good salaries and Social Security. Taking the RMD now could put them in the 24% tax bracket, but delaying until retirement next year could drop them to around 12%.
It can also affect Medicare premiums through IRMAA surcharges.
Wendy McConnell: Okay.
Eric Blake: So planning matters — not just avoiding penalties but tax brackets, Social Security taxation, and Medicare premiums.
Wendy McConnell: My mind is reeling. You’ve convinced me — I’m hiring a financial advisor.
Eric Blake: That’s a great idea.
Wendy McConnell: It’s just so much.
Eric Blake: It really comes down to awareness and proactive planning.
We also have tax law changes, deductions with income thresholds, and the widow’s penalty — when one spouse passes away tax brackets shrink but RMDs stay large, potentially pushing the survivor into a higher bracket.
Wendy McConnell: Got it.
Eric Blake: Quick note on inherited accounts and Roth accounts. Non-spouse inherited IRAs follow the 10-year rule — must be emptied by year 10. Roth IRAs no longer have RMDs for the original owner but still follow the 10-year rule for beneficiaries.
Wendy McConnell: Lots to know.
Eric Blake: Lots to know. So let’s talk strategies.
Strategy one: Qualified Charitable Distribution (QCD). After age 70½ you can send money directly from your IRA to a charity and it counts toward your RMD but isn’t taxable income.
Example: $10,000 RMD, donate $5,000 — only $5,000 taxable.
Strategy two: timing — using low-income years early in retirement for Roth conversions or withdrawals to “fill the brackets.”
You must satisfy the RMD first before doing a Roth conversion in the same year.
Strategy three: taxable brokerage accounts — building tax flexibility.
Strategy four: if still working, many employer plans allow delaying RMDs for that employer plan until retirement.
Wendy McConnell: Just for that company, right?
Eric Blake: Correct. Sometimes rolling IRA money into that plan may help — depending on circumstances.
So key takeaways:
Know when RMDs begin. Plan proactively to avoid higher taxes and premiums. Understand widow’s penalty risks. Use timing and coordination for flexibility.
We’ll make the checklist available at simplyretirementpodcast.com/rmd.
Wendy McConnell: Lots of stuff.
Eric Blake: Lots of stuff — awareness and resources.
Thank you again, Wendy, for joining me today. Thank you to our audience for tuning in. If this episode raised questions about RMD planning or tax strategies, that’s exactly what we help with.
You can visit getmysimplyretirementroadmap.com to schedule a call with our team.
That’s it for today’s episode. For links and resources, visit simplyretirementpodcast.com. Until next time, please remember — retirement is not the end of the road. It’s the start of a new journey.
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