Turning 65? Here's How To Start Planning For RMD Taxes

Reaching age 65 is a milestone for many in life and retirement planning.

But one key tax consideration is already on the horizon — the looming required minimum withdrawals (RMDs) from tax-deferred retirement accounts.

Understanding and planning for these now could potentially help minimize your potential tax burden once they inevitably kick in.

Speaking with a fiduciary financial advisor can be a good first step to planning ahead for RMDs and developing a strategy that could potentially help minimize future taxes.

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Why Proactive RMD Planning Matters

Although you may not yet be required to begin withdrawals at 65, the rules around RMDs could potentially impact your tax profile down the line.

RMDs kick in at age 73. Before they do, you’ll likely want to be well-versed in and have a plan for the following:

• RMD taxes: Withdrawals from traditional IRAs and many 401(k)s are taxed at ordinary-income rates.
• RMD calculations: Your account balance at December 31 of the prior year divided by a life-expectancy factor, determined by the IRS.
• RMD penalties: Up to 25% of the undistributed amount for missing a distribution (or potentially as low as 10% if corrected quickly).

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How to Plan for RMDs at Age 65

With eight or more years before you may need to begin taking RMDs, you have the chance to start building a thoughtful strategy.

Consider these steps to get started:

• Evaluate your future withdrawal timeline. Even though you may be 65 now, understanding what your potential balances may be when you reach 73 may potentially help you anticipate the future tax burden. The larger your potential account balance at RMD age, the larger the forced withdrawal and taxes may be.
• Explore tax-efficient strategies. Options may include converting some funds to a Roth IRA (thereby potentially avoiding future RMDs), or planning withdrawals in lower-income years to help minimize tax drag.
• Plan for future strategic Qualified Charitable Distributions (QCDs). You may be able to start making QCDs directly from your IRA once you reach age 70½. Instead of withdrawing funds, paying taxes, and then donating to charity, you can transfer up to $105,000 per year (as of 2025) directly from your IRA to one or more qualified charities.

RMD planning can be complicated, as individual details such as additional income streams, retirement timing, health and estate goals may potentially impact your RMD taxes.

This could be why many investors may work with a fiduciary financial advisor to help integrate RMD planning into their broader wealth planning strategy.

Fiduciaries may be able to help you understand your options when it comes to planning for RMDs and minimizing your tax liability.

SmartAsset’s latest proprietary model reveals that working with a financial advisor could potentially add from 36% to 212% more dollar value to investors’ portfolios over a lifetime, depending on multiple unique, individual factors.¹

If you’re already thinking about creating an RMD strategy, it may be a good time to speak with a fiduciary financial advisor.

That’s why we created a free tool to help match you with vetted financial advisors who serve your area, each legally bound to work in your best interest.

It's never too late to plan to work toward a comfortable retirement. Get your financial advisor matches today.

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Sources:
1. “The Value of a Financial Advisor: What’s It Really Worth?” SmartAsset (Nov. 2024)