RMDs and giving from your IRA

A traditional IRA is a deal with the government: no tax going in, full tax coming out. The required minimum distribution, or RMD, is how the government makes sure “coming out” eventually happens. Most retirees’ planning room is right here, in how the RMD, Social Security and charitable giving interact, and the interaction is worth more than any of the three alone.

Required minimum distributions

When they start. The year you turn 73 if you were born from 1951 through 1959; 75 if you were born in 1960 or later. The first one can be delayed to April 1 of the following year, but then two come out in one year, which usually is not worth it.

How much. Your December 31 balance divided by a life-expectancy factor. At 73 the factor is 26.5, so about 3.8% of the balance. It climbs every year; at 80 it is about 4.9%, at 90 about 8.2%. A $400,000 IRA at 73 must pay out about $15,100.

Which accounts. Traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, 403(b)s and similar plans. Roth IRAs have no RMD while the owner is alive, and since 2024 neither do Roth 401(k)s. IRAs can be combined for the calculation and the total taken from any one of them; 401(k)s and other employer plans each have to pay their own.

Still working at 73? If you are employed and do not own more than 5% of the company, the RMD from that employer’s plan can wait until you retire. Your IRAs and old 401(k)s do not get the delay.

If you miss one. The penalty is 25% of the amount you should have taken, reduced to 10% if you take it and file Form 5329 within the correction window. The IRS often waives it entirely for a reasonable cause and a prompt fix. Ask a preparer before you pay it.

Withholding. The custodian withholds 10% for federal tax unless you tell it otherwise on Form W-4R, and in Colorado withholds nothing for the state unless asked. Ten percent is rarely the right number. Many retirees have the whole year’s tax withheld from the December RMD instead of making quarterly payments. That works because withholding is treated as paid evenly through the year no matter when it comes out; estimated payments are credited only on the date paid.

Giving to charity from your IRA

If you are 70½ or older and you give to charity anyway, this is usually the best way to do it. A qualified charitable distribution, or QCD, sends money from your IRA straight to a charity, up to $111,000 per person in 2026. It counts toward your required minimum distribution, and it never appears in your income at all.

That is better than a deduction. A deduction only helps if you itemize, and most retirees do not anymore; the new $1,000 / $2,000 non-itemizer deduction helps a little, but it stops at $2,000. A QCD helps everyone, from the first dollar, and because it keeps adjusted gross income down, it also holds down the taxable share of your Social Security and, two years later, your Medicare premium.

The rules that trip people up. The check has to go from the IRA custodian to the charity, not through you; a check made payable to the charity and mailed to you to forward is fine, one deposited in your account is not. Donor-advised funds and private foundations do not qualify. You must be 70½ on the day of the gift, not just that year. If you want the QCD to count against the RMD first, take it before any other distribution that year. A gift from a 401(k) does not qualify; roll the money to an IRA first. The charity still has to give you a written acknowledgment.

Can the whole RMD be a QCD? Yes. Many people give the entire RMD to charity. Any amount of the RMD you do not give still has to come out and is taxed as usual.

How the three work together

The RMD raises everything else. The year withdrawals become mandatory is often the year a retiree’s Social Security goes from partly taxable to mostly taxable, and the two effects stack: a $10,000 RMD can add up to $8,500 of taxable Social Security on top of itself. Two years later the same income can push Medicare premiums into a surcharge tier, where one dollar over a line triggers the whole tier. The 2026 surcharge starts above $109,000 of modified AGI single, $218,000 joint, based on the 2024 return.

The QCD lowers it back down. Giving the RMD, or part of it, straight to charity takes that income off the return before any of the formulas see it. For someone who tithes or gives regularly, routing the gifts through the IRA from 70½ on can be worth thousands a year compared with writing checks.

The senior deduction does not change the formula. The $6,000 deduction for anyone 65 or older comes off after the Social Security worksheet has done its work, so it does not keep an RMD from making more of the benefit taxable. For a retired couple with $90,000 of income it is still roughly $1,400 to $2,600 of federal tax, and it arrives automatically.

Roth conversions before 73. Money converted to a Roth in your 60s is taxed then, at rates you choose, and never has an RMD. Retirees who convert steadily in the years between retiring and 73, filling a bracket each year and staying under the Medicare lines, often cut their lifetime tax and their survivor’s. Once RMDs begin, the RMD itself must come out first and cannot be converted.

Inherited IRAs

Different rules. Most non-spouse heirs must empty the account within ten years, and if the owner had already reached RMD age, annual distributions are required in years one through nine as well. A surviving spouse has more choices, including treating the account as their own. If the owner died before taking that year’s RMD, it still has to come out, to the beneficiary, by December 31. A beneficiary who is 70½ can make QCDs from an inherited IRA as well.