Required minimum distributions (RMDs) aren’t a problem for everyone. But if yours are likely to significantly increase your 2026 tax bill, you may be wondering how to keep that from happening year after year.
Fortunately, there are a few strategies that may help reduce future RMDs, though both involve trade-offs. Here’s what to know before deciding which approach makes sense for you:
Roth IRA Conversion
A Roth IRA conversion involves moving some of your tax-deferred retirement savings into a Roth account. Doing so can give you tax-free withdrawals in retirement, and Roth IRA savings aren’t subject to RMDs.
The drawback is that, generally, you will owe taxes on the converted amount in the year you make the conversion. That means reducing your 2027 RMDs this way could further increase your 2026 tax bill.
A conversion could make sense if your income this year is substantially lower than it’s been in previous years, but if you’re already in a high tax bracket, the additional taxes in 2026 may outweigh the future benefits.
Qualified Charitable Distribution
Another option is a qualified charitable distribution (QCD), which allows you to send money from your retirement account directly to an eligible charity. A QCD can count toward your RMD while keeping the distributed amount from adding to your taxable income.
To complete a QCD properly, tell your plan administrator which organization should receive the money. The administrator can either transfer the funds directly, or issue a check payable to the charity for you to deliver.
You could technically still use this strategy for your 2026 QCDs if you haven’t already withdrawn the money yourself. If the funds pass through your hands, the withdrawal isn’t considered a QCD, even if you later donate the entire amount to charity. It’s also a strategy worth considering if you’re trying to reduce your 2027 tax bill.
If you’re unsure how your RMDs could affect your taxes in 2026 or 2027, consider speaking with a qualified tax advisor. Make sure you have a strategy in place to cover these additional expenses. If you end up with a bill that you can’t pay with personal savings, you may need to set up a payment plan with the IRS.
Source: The Motley Fool
*QCDs generally must come directly from an IRA, not just any retirement account. For 2026, the annual QCD exclusion limit is $111,000 per eligible individual. The IRA owner must also be at least age 70½ when the distribution is made. https://www.irs.gov/publications/
This material is provided for general educational and informational purposes only and is not intended to provide, and should not be relied upon as, individualized tax, legal, investment, or financial advice. Tax laws, regulations, limits, and eligibility requirements are subject to change, and the tax consequences of Roth conversions, required minimum distributions (RMDs), qualified charitable distributions (QCDs), and other retirement planning strategies vary based on individual circumstances. Insurance and financial professionals do not provide tax or legal advice unless separately qualified to do so. Individuals should consult with a qualified tax or legal professional regarding their specific circumstances before taking action. Neither a Roth conversion nor a QCD is appropriate for every individual, and each may have tax and other financial consequences that should be carefully considered.
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