Retirees facing required minimum distributions (RMDs) in 2026 should be aware of recent changes to the starting age and how those changes impact their tax situation. The Secure Act moved the RMD age to 72 in 2020, and Secure 2.0 pushed it to 73 in 2023. The age will rise again to 75 beginning in 2033.
How RMD amounts are calculated
For the 2026 tax year, the RMD amount is based on the account balance as of December 31, 2025. Because 2025 was a strong year for most major asset classes, many retirees will see larger RMD figures. The IRS also increases the distribution percentage as you age, so the only time an RMD will not grow is if the portfolio loses value.
Withdrawal percentages by age
When RMDs start at age 73, the calculation uses a life‑expectancy factor of 26.5 years, resulting in a 3.77 % withdrawal rate. At age 80 the rate climbs to about 5 %, and at age 85 it reaches roughly 6 %. While these rates exceed the traditional 4 % safe‑withdrawal guideline, research shows older retirees can safely withdraw higher percentages without risking outliving their savings.
Strategies to reduce tax impact
Retirees do not have to spend their RMDs. After withdrawing the required amount, you can reinvest the funds. If you or your spouse are still working, you may contribute up to the 2026 IRA contribution limit of $8,600 (for those over 50) or the amount of earned income, whichever is lower. Those without earned income can place the money in a taxable brokerage account.
Targeted withdrawals can also improve portfolio balance. Instead of taking a pro‑rata distribution from every holding, consider pulling from over‑concentrated positions or sectors that need trimming.
Long‑term planning tips
While you are still contributing to retirement accounts, directing new money to Roth accounts can eliminate future RMDs, as Roth IRAs are not subject to required distributions. However, if you are in peak earning years, traditional tax‑deferred contributions may still provide a larger immediate tax break.
For those who have not yet reached the RMD age, converting traditional IRA assets to Roth before RMDs begin can lower future distribution amounts and reduce taxable income.
Qualified charitable distributions
If you are already taking RMDs, consider a qualified charitable distribution (QCD). In 2026 you can direct up to $111,000 per person from a traditional tax‑deferred account to a qualified charity. The QCD amount is excluded from taxable income, counts toward your RMD, and reduces the balance subject to future RMD calculations.
Consult a financial adviser to tailor these strategies to your specific situation and ensure compliance with IRS rules.
Original reporting: Alexandria, VA News – WTOP News — read the source article.
