RMD Planning Strategies for High-Net-Worth Retirees

Required minimum distributions hit differently at $5M+ in investable assets. A $3M traditional IRA forces out $113,000 in year-1 RMDs at age 73 — all taxed as ordinary income, all added to your Medicare IRMAA calculation, all potentially pushing you deeper into the 37% bracket. And that IRA is likely still growing. By age 80, the same $3M IRA (at 6% growth) forces $200K+ annual RMDs whether you need the money or not. The tax bill isn't coming from one bad year — it's baked into the account structure. The window to change it is the decade before RMDs start.

When RMDs start: SECURE 2.0 ages

The SECURE 2.0 Act (2022) raised the RMD starting age in two steps. Your birth year determines which rule applies:¹

First-year delay trap: You can delay your first RMD to April 1 of the following year. But if you do, you still must take your second RMD by December 31 of that same year — meaning two taxable RMDs in one calendar year, potentially doubling your income and triggering IRMAA. Most HNW retirees are better off taking the first RMD in the year they turn 73 (or 75), not deferring it.

Accounts subject to RMDs: Traditional IRAs, rollover IRAs, SEP-IRAs, SIMPLE IRAs, traditional 401(k)s, 403(b)s, governmental 457(b)s. Roth IRAs are exempt during the owner's lifetime. Roth 401(k)s and Roth 403(b)s are also now exempt starting 2024 (SECURE 2.0 § 325 eliminated Roth designated account RMDs).²

How the RMD amount is calculated

The formula is straightforward: prior year-end account balance ÷ your IRS life-expectancy divisor from the Uniform Lifetime Table (ULT). The divisor shrinks each year as you age, forcing a larger percentage out of the account each year.

Source: IRS Pub. 590-B (2025), Appendix B, Table III — Uniform Lifetime Table. The 2026 RMD is calculated using the December 31, 2025 account balance.

If you own multiple IRAs, you can aggregate the RMDs and take the total from any one account (or any combination). 401(k)s must be calculated and satisfied separately per plan.

RMD projection calculator

Enter your current age and IRA/401(k) balance. The calculator projects annual RMDs from your RMD start age through age 90, then shows how QCDs and a QLAC reduce taxable exposure.

The HNW problem: why the RMD bill is larger than it looks

A common mistake is viewing RMDs in isolation. At $5M+ investable assets, RMDs interact with three other cost centers simultaneously:

• Medicare IRMAA. RMDs add directly to MAGI (Modified Adjusted Gross Income), which determines your Medicare Part B and Part D surcharges two years forward. A $150,000 RMD on top of existing Social Security, dividends, and capital gains can push a couple deep into top IRMAA tiers — adding $10,000–14,000/year in Medicare premiums. See the full IRMAA planning guide.
• Social Security taxation. At $5M+ in assets, virtually all Social Security benefits (85%) are already taxable. But RMDs can push combined income high enough to eliminate planning room for other strategies.
• State income tax. In high-tax states (CA 13.3%, NY 10.9%, NJ 10.75%), a $200,000 RMD carries a state tax burden of $20,000–27,000 on top of federal. Domicile planning before large RMD years has real value. See the state tax planning guide.

Five strategies to manage RMDs at HNW scale

1. Roth conversions before RMDs start (the most powerful lever)

Every dollar converted from a traditional IRA to a Roth IRA before RMD age is a dollar that will never generate a forced taxable distribution. The math is straightforward: if you have $3M in a traditional IRA at age 65 and convert $200,000/year for 8 years (to age 73), you reduce the taxable IRA balance by $1.6M before RMDs begin — and that $1.6M grows tax-free in the Roth going forward.

The constraint is that conversions are ordinary income in the year of conversion, so the strategy requires careful bracket and IRMAA management. The optimal approach is to "fill the bracket" each year — converting just enough to reach (but not cross) a tax bracket or IRMAA threshold ceiling.

For example, if you have $180K in other income, the 32% bracket ceiling (MFJ, 2026) is $512,450. You can convert up to $332,450 before hitting 35% — all at 32%. See the full bracket math and IRMAA cliff analysis in the Roth conversion strategy guide.

2. Qualified Charitable Distributions (QCDs) — $111,000/year, MAGI-free

If you are age 70½ or older with a traditional IRA, you can direct up to $111,000/year (2026)³ to a qualifying public charity as a Qualified Charitable Distribution. Key points:

• The QCD counts dollar-for-dollar toward your RMD for the year.
• The amount is excluded from gross income entirely — not just deducted. This is the critical distinction: a regular withdrawal + charitable deduction only helps if you itemize, and even then you lose the above-the-line benefit. A QCD reduces MAGI directly.
• A couple can each do $111K, for $222K in annual MAGI reduction — potentially eliminating two or three IRMAA tiers.
• One-time election: up to $55,000 (2026) of a QCD can fund a split-interest vehicle such as a Charitable Remainder Trust or Charitable Gift Annuity, creating an income stream while preserving charitable intent.³

QCDs don't reduce the underlying IRA balance as fast as Roth conversions, but they're especially powerful for charitably-inclined HNW retirees who are already making gifts — redirecting those gifts from after-tax dollars to pre-tax IRA dollars is a no-brainer. See the full donor-advised fund and charitable giving guide for coordination with DAFs (QCDs cannot go to DAFs or private foundations).

3. Qualified Longevity Annuity Contracts (QLACs) — defer up to $210,000

A QLAC is a deferred income annuity purchased inside a traditional IRA or 401(k). The amount invested in the QLAC is excluded from the RMD calculation until the QLAC begins paying — typically at age 80 or 85. The 2026 limit is $210,000 per individual (indexed for inflation; SECURE 2.0 eliminated the prior 25%-of-balance cap).⁴

On a $3M IRA, investing $210K in a QLAC reduces the RMD base to $2.79M — saving approximately $7,900 in year-1 RMDs alone. More importantly, it defers that $210K and its growth from the RMD calculation for potentially 10–15 years, and converts it into a guaranteed income stream at advanced age when portfolio longevity risk is highest.

QLACs are not universally appropriate — they're illiquid, return depends on you living to receive payments, and they're a concentrated bet with an insurance company. But for an HNW household where longevity risk is the primary concern (not liquidity), carving $210K per spouse into QLACs is a low-cost, IRS-sanctioned RMD management strategy worth evaluating.

4. The still-working exception (for current employees)

If you are still employed — as an employee, not a self-employed owner — by the company that sponsors a 401(k) or 403(b) plan you participate in, you may defer RMDs from that plan until April 1 of the year after retirement, regardless of age. This doesn't apply to IRAs, but it does apply to the current employer's plan.

For executives who continue working into their 70s, or who take board or consulting roles that qualify as employment, this exception can defer a meaningful amount of forced income. One strategy: roll old 401(k)s and IRAs into the current employer's plan (if the plan accepts rollovers) to expand the protected base beyond just new contributions.

5. Roth 401(k) funding: eliminate future RMDs at the source

Since 2024, Roth designated accounts in 401(k)s and 403(b)s have no lifetime RMD requirement (SECURE 2.0 § 325).² Every dollar contributed to a Roth 401(k) — not a traditional 401(k) — is permanently exempt from RMDs. For an executive or business owner in their 50s or 60s with cash-flow flexibility, maximizing Roth 401(k) contributions ($24,500 base + $8,000 catch-up at 50+, or $11,250 super catch-up at ages 60–63 in 2026) and the Roth component of an in-plan conversion builds a growing RMD-exempt balance over time.

Combined with a mega backdoor Roth strategy (after-tax contributions + in-plan conversion of up to $47,500 in 2026 room beyond the deferral limit), this can shelter $50,000+ per year into permanent RMD-exempt accounts. See the backdoor and mega backdoor Roth guide.

Penalty for missing an RMD

A missed or short RMD is subject to a 25% excise tax on the shortfall (reduced from 50% under SECURE 2.0). If you correct the error within the IRS correction window — generally two years — the penalty drops to 10%. The IRS also has a correction program (EPCRS for plan failures; individual IRA owners can self-correct under Rev. Proc. 2023-19). Missing an RMD is correctable, but doing so still results in penalties and amended returns. Automated distributions from your custodian are the simplest safeguard for HNW retirees who may have multiple accounts across institutions.

Inherited IRA RMDs: a separate problem

If you inherit an IRA as a non-spouse beneficiary (a child or non-spouse), the SECURE Act's 10-year rule applies. IRS final regulations (T.D. 10001, July 2024) confirmed that if the original owner died after their required beginning date (i.e., they had already started RMDs), non-eligible designated beneficiaries must take annual distributions in years 1–9 in addition to fully depleting the account by year 10. This prevents the "no annual distributions, then one giant year-10 withdrawal" strategy some inheritors were using.

For an HNW inheritor receiving a $2M traditional IRA, this creates forced ordinary income over 10 years — often in peak earning years when the marginal rate is highest. The primary planning lever is timing other deductions and income around these mandatory distributions, or coordinating with the original owner's estate plan to leave IRAs to charitable beneficiaries (via a CRT or direct bequest to charity) rather than to high-income heirs. See the charitable remainder trust guide for how a testamentary CRUT can replace the stretched IRA benefit.

Building an integrated RMD strategy

The most effective RMD plans are built 10–15 years before RMDs begin, because that's when the key levers — Roth conversions, QLAC purchases, Roth 401(k) contributions, domicile changes — are still available at full capacity. By age 72, most of these levers are either exhausted or constrained by the RMDs themselves.

The coordination challenge is that each strategy affects at least two other variables: a Roth conversion reduces future RMDs but raises current-year IRMAA two years forward; a QLAC reduces the RMD base but creates concentration risk with an insurer; QCDs satisfy charitable goals but can't fund DAFs or private foundations. Fee-only advisors who specialize in HNW retirement income planning model these interactions using multi-year tax projections across:

• Roth conversion sizing by year (filling tax brackets without crossing IRMAA cliffs)
• QCD allocation across charities and charitable vehicles
• QLAC evaluation against alternative uses of capital
• Account drawdown sequencing: which accounts to spend from and in what order
• State tax timing for domicile changes or large income events