If you’re 73 or older in 2025, Required Minimum Distributions (RMDs) are probably already on your radar. But even if you’re not there yet, understanding how they work—and ways to help costly missteps—can have a big impact on your retirement income and long-term tax strategy.
Let’s walk through five of the most common RMD mistakes we see, and how a little proactive planning can help you sidestep them.
#1: Waiting Too Long to Take Your First RMD
You have until April 1 of the year after you turn 73 to take your first RMD. But waiting could backfire. If you delay your first withdrawal into the following year, you’ll end up with two taxable distributions in the same calendar year—which can bump you into a higher tax bracket and increase your Medicare premiums (thanks to IRMAA).
For many retirees, it’s better to take that first RMD in the year you turn 73 to help avoid doubling up the following year. This is especially true if your income will be higher in the future.
#2: Ignoring the IRMAA Effect
IRMAA—the Income-Related Monthly Adjustment Amount—is a fancy way of saying “the more you earn, the more you pay for Medicare.” And RMDs count as income.
If your RMD pushes you over certain thresholds, your Medicare Part B and D premiums could increase substantially. And here’s the kicker: IRMAA is based on your income from two years ago, so you have to think ahead. If you’re not factoring Medicare premiums into your withdrawal strategy, you might be paying more than necessary.
#3: Missing the Deadline
This seems obvious, but it happens more often than you’d think—especially with people juggling multiple accounts. RMDs must be taken by December 31st. If you miss it the IRS can penalize you 25% of the amount you should have withdrawn. Say your RMD is $20,000—missing it could cost you $5,000. Even if you correct it later, the IRS still expects you to file paperwork asking for relief, which adds stress and potential delays.
#4: Taking the RMD from the Wrong Account
Many people think they can pull money from anywhere, but that’s not true. With IRAs, you can combine the total and take it from one account if you’d like. But with 401(k)s, each plan requires its own separate distribution. If you pull from the wrong account, the IRS treats it as though you didn’t take your RMD at all, which means you could face the same 25% penalty.
#5: Treating RMDs Like a Nuisance
Many people treat RMDs as an annual obligation—take the minimum, pay the tax, move on. But your RMD is also an opportunity to think bigger about your retirement plan.
Want to help reduce future RMDs? Consider a Roth conversion strategy now.
Want to support a charity? A Qualified Charitable Distribution (QCD) can let you direct your RMD to a nonprofit tax-free.
Want to rebalance your portfolio? Use your RMD as a chance to trim appreciated assets.
The point is, your RMD doesn’t have to just be a “tax hit”—it can be part of a broader plan that supports your goals.
RMDs are complex—but they don’t have to be stressful. With the right strategy, you can manage your tax exposure, optimize your retirement income, and potentially lower your Medicare costs. As we approach year-end, this is a great time to check in with your advisor to make sure everything is aligned.
At South Shore Retirement Services, we help you avoid these costly mistakes. We calculate the right amount, make sure it comes from the right place, and fit it into your tax and income plan.
Need help reviewing your RMDs or planning your withdrawal strategy? We’re here to help.
Disclosure: Please remember that converting an employer plan account to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.
