RMD at Age 73: Three Strategies to Reduce Taxes on a $1M Traditional IRA

How the IRS calculates your 2026 RMD on a $1M IRA

The math is straightforward. Under IRC § 401(a)(9), your RMD equals your prior-year December 31 IRA balance divided by the Uniform Lifetime Table divisor for your current age (IRS Pub. 590-B, Table III).

At age 73, the divisor is 26.5. On a $1,000,000 balance:

• RMD = $1,000,000 ÷ 26.5 = $37,736
• Tax character: ordinary income at your marginal federal rate
• Due by: December 31 of the year you turn 73 (or April 1 of the following year for your first RMD only — but that creates a double-withdrawal trap)

The divisor shrinks every year. By age 80, it drops to roughly 20.2, making your RMD about 4.95% of the balance. If your $1M IRA grows at 6% annually and you only withdraw the minimum, the RMD climbs to over $55,000 by age 80 — and the tax bill grows with it.

What RMD income does to your tax bracket

An Atlanta couple, both 73, with $1.8M in his Traditional IRA and $400K in hers. Combined Social Security: $72,000/year. They never did a single Roth conversion.

At $155,018 MFJ taxable income, they’re in the 22% federal bracket (the 22% bracket runs $96,951–$206,700 MFJ in 2026). Without RMDs, Social Security alone would have kept them in the 12% bracket. That bracket jump costs them roughly $5,800 per year in additional federal tax — and their combined MAGI triggers the second IRMAA tier, raising Part B premiums from $185/month to $370/month each. That’s an extra $4,440/year in Medicare costs.

Total damage from not planning: ~$10,200/year in avoidable taxes and premiums. Over a 15-year retirement, that compounds to six figures.

Strategy 1: Roth conversions in the gap years (the most underused lever)

Between the year you retire and the year RMDs begin, you likely have a multi-year window where your taxable income drops to nearly zero — no paycheck, Social Security may not have started, and RMDs haven’t kicked in. This is the gap-year conversion window, and it’s the single most underused strategy in retirement planning.

The play: convert Traditional IRA money to Roth during these low-income years, filling up the 10% and 12% brackets. Every dollar converted pays tax now at 10–12% instead of 22–24% later when RMDs, Social Security, and IRMAA all stack up.

Worked example: $50K/year conversions from age 65 to 72

Starting balance: $1M Traditional IRA at age 65. You retire, delay Social Security to 70, and convert $50,000/year for 8 years.

The $44,000 in conversion tax pays for itself in roughly 10 years of lower RMD taxation — and the Roth balance grows tax-free with no RMDs during your lifetime (IRC § 408A(c)(5)). Your heirs inherit the Roth under the 10-year rule, but inherited Roth distributions are tax-free as long as the 5-year holding period was met.

The constraint: each conversion adds to your MAGI in the year of conversion. Convert too aggressively and you hit the IRMAA cliff at $103K single / $206K MFJ or lose ACA premium subsidies (if converting before age 65). Size each conversion to fill the 12% bracket ($96,950 MFJ in 2026) without spilling into 22%.

Strategy 2: Qualified charitable distributions (QCDs) — the tax-free RMD

If you’re 70½ or older and give to charity, a QCD is the most tax-efficient way to do it. Under IRC § 408(d)(8), you can transfer up to $105,000 per person per year (2026, inflation-adjusted under SECURE 2.0) directly from your IRA to a qualifying 501(c)(3) charity. The amount:

• Counts toward your RMD for the year
• Is excluded from taxable income entirely — it never hits your AGI
• Reduces MAGI for IRMAA, Social Security taxation, and ACA subsidy calculations
• Does not require you to itemize deductions (unlike a normal charitable deduction)

QCD vs. normal charitable deduction: the math

A single filer at 73 with a $1M IRA, $37,736 RMD, and $36,000 in Social Security. She donates $20,000 to her church every year.

The QCD saves roughly $2,295 in federal tax on the same $20,000 donation. The difference comes from two places: the QCD reduces AGI (which the standard deduction then further reduces), while the normal donation path forces you to choose between itemizing and the standard deduction. For most retirees who don’t itemize, the QCD is the only way to get a tax benefit from charitable giving.

The fine print: QCDs must go directly from the IRA custodian to the charity — you cannot withdraw the money, deposit it in your checking account, and then write a check to the charity. The check must be payable to the charity, not to you. Most custodians (Fidelity, Schwab, Vanguard) have a QCD-specific distribution form.

SECURE 2.0 addition: starting in 2024, you can make a one-time $53,000 QCD to a charitable remainder trust or charitable gift annuity (subject to a separate lifetime cap). This is a niche tool but worth flagging for retirees who want income from a CRT while reducing RMDs.

Strategy 3: Strategic early withdrawals to flatten the tax curve

Even if you don’t convert to Roth, withdrawing from the Traditional IRA before RMDs begin — and paying tax now at a lower rate — reduces the balance that triggers future mandatory distributions.

This is a simpler version of the Roth conversion strategy for retirees who don’t want the complexity of managing a separate Roth account. The math works the same way: pull money out during low-income years (filling the 12% bracket), pay the tax, and park the after-tax proceeds in a taxable brokerage account. The brokerage account grows at LTCG rates (0%/15%/20%) instead of ordinary income rates (10–37%) — a favorable trade for most retirees.

The bracket-fill calculation for 2026

A single filer, age 66, recently retired, no Social Security yet. Standard deduction: $15,750 + $1,600 (age 65+ additional) = $17,350. The 12% bracket tops out at $48,475.

• Taxable income capacity in the 12% bracket: $48,475
• Add back the standard deduction: $48,475 + $17,350 = $65,825 of gross income before hitting the 22% bracket
• If no other income: withdraw up to $65,825 from the Traditional IRA and pay roughly $5,580 in federal tax (blended 10% + 12%)
• That same $65,825 withdrawn at 73 as part of an RMD stacked on Social Security would face an effective rate of 22% — roughly $14,482 in federal tax

Savings per year of early withdrawal: ~$8,900 in federal tax. Do this for 7 years (ages 66–72) and you’ve saved roughly $62,000 in total federal tax while pulling $460,000 out of the IRA before RMDs force it out at higher rates.

The IRMAA cliff: where aggressive conversions backfire

Medicare Part B and Part D premiums are income-tested through the Income-Related Monthly Adjustment Amount (IRMAA). The thresholds use your MAGI from two years prior — so a large 2024 Roth conversion affects your 2026 premiums.

The first cliff is the one that bites most retirees. A single filer with $102,000 of MAGI pays $185/month. At $103,001, it jumps to $259/month — $888/year extra for $1 of income. Add Part D surcharges and it’s over $1,050.

The planning rule: size your Roth conversions and early withdrawals to land your MAGI just below the nearest IRMAA threshold. For a single filer, that means targeting total MAGI under $103,000. For MFJ, under $206,000. Going $1 over the line costs more than the tax you saved by converting that last dollar. The IRMAA targeting math should drive every Roth conversion decision after age 63 (since IRMAA uses the two-year lookback).

The 25% excise tax on missed RMDs — and how to get it reduced

Miss your RMD (or take less than the required amount) and the IRS imposes a 25% excise tax on the shortfall under IRC § 4974. SECURE 2.0 cut this from the previous 50% penalty — still painful, but more survivable.

Example: your 2026 RMD is $37,736 and you withdraw only $20,000. The shortfall is $17,736. Excise tax: $17,736 × 25% = $4,434.

How to reduce it to 10% (or zero)

SECURE 2.0 added a correction window: if you fix the shortfall by the end of the second tax year following the year of the missed RMD, the penalty drops from 25% to 10%. In the example above, that cuts the penalty from $4,434 to $1,774.

To request full abatement (penalty waived entirely):

1. Take the missed distribution as soon as you discover the error
2. File Form 5329 (Additional Taxes on Qualified Plans) with your tax return
3. Attach a letter of reasonable cause explaining why you missed the RMD — serious illness, death of a spouse, custodian error, or reliance on bad professional advice are common accepted reasons
4. Pay any additional income tax on the late distribution

The IRS routinely waives the penalty for first-time misses with reasonable cause. The key is acting quickly once you realize the error — sitting on a missed RMD for years makes the reasonable-cause argument much harder.

The decision map: which strategy fits your situation

These three strategies aren’t mutually exclusive. Most retirees with $1M+ in pre-tax accounts should layer two or three together, depending on where they are in the timeline.

Social Security taxation: the hidden tax on RMD income

Here’s the part most retirement calculators miss. Social Security benefits become taxable based on “combined income” (AGI + nontaxable interest + half of SS benefits). The thresholds — set in 1983 and never indexed for inflation — catch almost every retiree with an IRA:

• Single: 50% of SS taxable above $25,000 combined income; 85% taxable above $34,000
• MFJ: 50% above $32,000; 85% above $44,000

A single filer with $37,736 in RMD income and $24,000 in Social Security has combined income of $37,736 + $12,000 (half SS) = $49,736. That’s well above the $34,000 threshold — 85% of her Social Security ($20,400) becomes taxable. RMD income doesn’t just get taxed itself; it drags Social Security income into the tax base.

Every dollar removed from the Traditional IRA before RMDs begin is a dollar that won’t trigger this cascade. This is why the gap-year conversion window matters so much: it’s not just about the IRA tax — it’s about the Social Security taxation multiplier that stacks on top.

Key deadlines and mechanical details

• RMD deadline: December 31 of each year (first year only: you can delay to April 1 of the following year, but the double-withdrawal trap usually makes this a bad idea).
• Roth conversion deadline: December 31 of the tax year — not the April 15 filing deadline. No extensions. Once converted, it cannot be undone (TCJA eliminated recharacterization of conversions).
• Roth 5-year rule: earnings inside the Roth are tax-free only if the Roth has been open 5+ years and you’re 59½+. Converted principal can be withdrawn anytime without penalty if you’re over 59½ (IRC § 408A).
• QCD eligibility: age 70½ (not 73). You can start QCDs before your RMD age.
• Pro-rata rule: if you’re doing backdoor Roth conversions while holding pre-tax IRA balances, IRC § 408(d)(2) blends the pre-tax and after-tax money proportionally. You cannot cherry-pick which dollars to convert.
• Account aggregation: the IRS treats all your Traditional IRAs as one account for RMD calculation purposes. You must calculate the total RMD across all accounts, but you can withdraw it from any one (or combination) of them.

The bottom line

A $1M Traditional IRA at age 73 generates roughly $37,736 in mandatory taxable income every year — and the amount grows. Stacked on Social Security, it pushes most retirees into the 22% bracket and triggers IRMAA surcharges that cost thousands per year. The three strategies that shrink the damage — Roth conversions during gap years, QCDs for charitable retirees, and strategic early withdrawals — all share one thing in common: they work best before age 73. The window between retirement and mandatory distributions is the highest-value planning period in the entire retirement timeline. Once RMDs start, the options narrow. If you’re in the gap years now, model the conversion ladder. If you’re already at 73, start the QCDs and plan next year’s IRMAA bracket. The tax code rewards people who act before the deadline, not after it.