Required Minimum Distributions Are Coming at Age 73. Here’s How to Slash the Tax Bill Before It Hits
Most people know Required Minimum Distributions start at age 73, but very few realize just how big the tax bite can be when they finally kick in. A client we will call Mark came to us at age 71 with a traditional IRA worth $1.2 million. His required beginning date was only 18 months away. Mark’s RMD at age 73 was projected to be just under $48,000 that first year and would climb every year after. Combined with Social Security and a small pension, that single distribution was going to push him from the 12% federal bracket into the 22% bracket and trigger thousands of dollars in additional Medicare premium surcharges.
We ran the numbers. If Mark did nothing, his estimated lifetime tax bill on those future distributions would exceed $420,000. Instead, we built a five-year Roth conversion plan that started immediately. Each year we converted just enough to “top off” the 12% bracket and stay under the IRMAA thresholds. Mark paid roughly $18,000 per year in tax on the conversions for five years. When his RMD age arrived, his traditional IRA balance had dropped to about $650,000 and his first RMD was only $26,000 instead of $48,000. More importantly, every dollar he converted is now growing tax-free and will never be taxed again, not to him, his wife, or his heirs.
When we showed Mark the final projection, he laughed and said, “I would have gladly written the IRS a check for $90,000 upfront to save over $300,000 later.” That is exactly what strategic tax planning does. It turns a future tax problem into a manageable, predictable expense today.
The window between retirement and age 73 is one of the lowest income periods most people will ever have. Miss that window and you lose the chance to move money out of the IRS’s reach forever. The math is compelling. A disciplined Roth conversion strategy during those years can often cut a retiree’s lifetime tax bill by six figures and eliminate Required Minimum Distributions entirely for a surviving spouse or heirs.
If you are within ten years of age 73 and most of your retirement savings sit in traditional IRAs or 401ks, let us run your personalized Roth conversion analysis. One conversation now can save your family tens or even hundreds of thousands later.
About Keystone Tax LLC
At Keystone Tax LLC in Eau Claire, Wisconsin, we specialize in retirement tax planning — helping clients reduce unnecessary taxes, maximize income, and build confidence for their financial future. To schedule a no-cost consultation, visit www.keystone-tax.com or call (715) 835-6022.
