RMD First Year: Double-Withdrawal Trap and Avoidance

The April 1 first-year RMD deadline is the most expensive default in retirement tax planning. It looks like a gift — an extra three to fifteen months before you have to touch your traditional IRA or 401(k). But the IRS is not being generous. They are letting you defer one year’s distribution into the next year, where it stacks on top of that year’s mandatory distribution. Two RMDs taxed in one calendar year. For households with $500,000 to $2 million in tax-deferred accounts and $80,000 to $150,000 in other retirement income, the double-withdrawal year can cost $8,400 to $14,000 in avoidable federal tax — plus IRMAA surcharges that persist for a full year of Medicare premiums and increased taxation of Social Security benefits.

How the April 1 rule creates the trap

Under IRC 401(a)(9) and IRS Publication 590-B, your required beginning date (RBD) for traditional IRA distributions is April 1 of the year following the year you reach age 73 (for those born 1951–1959) or age 75 (for those born 1960 or later, effective 2033 under SECURE 2.0). Every subsequent RMD is due by December 31 of each calendar year. If you turn 73 in 2026, your first RMD deadline is April 1, 2027. Your second RMD deadline is December 31, 2027. Both distributions are taxable income for 2027.

The IRS calculates your RMD by dividing your prior-year-end account balance by the applicable life expectancy divisor from the Uniform Lifetime Table (Table III of Publication 590-B, updated in 2022). At age 73, the divisor is 26.5. At age 74, it is 25.5. For a $1.2 million traditional IRA balance at year-end 2025:

• Age-73 RMD (first year): $1,200,000 ÷ 26.5 = $45,283
• Age-74 RMD (second year): assuming the balance is $1,160,000 after the first distribution and modest growth, $1,160,000 ÷ 25.5 = $45,490

Scenario A — take each RMD in its own year: $45,283 of additional income in 2026, $45,490 in 2027. Scenario B — defer the first RMD to April 2027: $0 of additional income in 2026, $90,773 of additional income in 2027.

Worked example: the bracket jump

Meet David and Karen, both 73, married filing jointly. Their 2026 income before RMDs:

• Combined Social Security: $52,000 (of which $44,200 is taxable at their income level — 85% inclusion under IRC 86)
• Karen’s pension: $28,000
• Taxable investment income (dividends, interest): $15,000
• Total pre-RMD gross income: $95,000

Standard deduction for MFJ, both 65+: $32,300 in 2026. Taxable income before RMDs: approximately $62,700 — solidly in the 22% bracket (which covers $94,300 to $201,050 of taxable income for MFJ).

Scenario A: one RMD per year

• 2026 gross income: $95,000 + $45,283 = $140,283
• 2026 taxable income: $140,283 − $32,300 = $107,983
• Federal tax on the $45,283 RMD: entirely within the 22% bracket. Tax: $9,962
• 2027 gross income: $95,000 + $45,490 = $140,490
• 2027 federal tax on RMD: $10,008
• Total federal tax on RMDs over two years: $19,970

Scenario B: two RMDs in 2027

• 2026 gross income: $95,000 (no RMD). Taxable income: $62,700. Federal tax: lower than Scenario A — saves approximately $9,962 in 2026
• 2027 gross income: $95,000 + $90,773 = $185,773
• 2027 taxable income: $185,773 − $32,300 = $153,473
• Federal tax on $90,773 in RMDs: the first $45,283 is taxed at 22%. The remaining $45,490 pushes taxable income from $107,983 toward $153,473 — still within the 22% bracket for MFJ (which extends to $201,050), so the bracket jump does not hit this couple. But they are now $47,000 closer to the 24% threshold, and any additional income (capital gains from rebalancing, an unexpected IRA distribution for a home repair) lands at 24% instead of 22%
• Total federal tax on RMDs over two years: $19,970 in tax on the same total amount, but all concentrated in 2027

The bracket math for David and Karen is close to neutral on rate alone. But the damage shows up in two other places.

IRMAA: the hidden two-year-delayed surcharge

Medicare Part B and Part D premiums are adjusted upward when your modified adjusted gross income (MAGI) exceeds threshold amounts. IRMAA uses a two-year lookback — your 2027 MAGI determines your 2029 Medicare premiums. The 2026 IRMAA thresholds for MFJ filers:

• MAGI up to $206,000: standard premium (no surcharge)
• $206,001 to $258,000: first surcharge tier — additional $70.90/month per person for Part B
• $258,001 to $322,000: second tier — additional $176.40/month per person
• $322,001 to $386,000: third tier — additional $252.60/month per person
• Above $386,000 (and up to $750,000): fourth tier — additional $352.80/month per person

In Scenario A, David and Karen’s MAGI is $140,283 in both 2026 and 2027 — well under $206,000. No IRMAA surcharge either year. In Scenario B, their 2027 MAGI is $185,773 — still under the threshold in this example. But increase their IRA balance to $1.5 million and the double-withdrawal year pushes MAGI to $208,000, triggering the first IRMAA tier. Cost: $70.90 × 2 people × 12 months = $1,701.60 in additional Medicare premiums in 2029.

For a $2 million IRA, the age-73 RMD is $75,472 and the age-74 RMD is approximately $76,471. Double-year MAGI: $95,000 + $151,943 = $246,943 — pushing into the first IRMAA tier with certainty. Split across two years, each year’s MAGI stays around $170,000 to $172,000, avoiding IRMAA entirely. The IRMAA avoidance alone is worth $1,700 to $4,200 per year of surcharge.

Social Security taxation: the 85% cliff

Up to 85% of your Social Security benefits are taxable under IRC 86 when your combined income (AGI + nontaxable interest + half of Social Security) exceeds $44,000 for MFJ filers. Most retirees with RMD-level income are already at the 85% inclusion rate. But retirees with lower other income — those relying primarily on Social Security with a modest pension — can be pushed from the 50% inclusion tier to the 85% tier by a double-withdrawal year. The threshold between 50% and 85% inclusion for MFJ is $44,000 of combined income.

A couple with $38,000 in Social Security, $12,000 in pension income, and a $400,000 traditional IRA has a combined income of $12,000 + $19,000 (half of SS) = $31,000 before RMDs. One RMD of $15,094 ($400,000 ÷ 26.5) pushes combined income to $46,094 — just above the $44,000 threshold, so 85% of Social Security becomes taxable. But they would have crossed that threshold with a single RMD anyway. The double-withdrawal amplifies the amount taxed at the 85% rate rather than creating the cliff crossing in most cases. The real cost is pushing the additional $15,000 of RMD income into the higher inclusion zone, adding approximately $2,100 to $3,400 in additional federal tax on Social Security benefits.

The fix: take your first RMD in the year you turn 73

The simplest avoidance strategy is to not defer. Take your first RMD by December 31 of the year you turn 73 instead of waiting until April 1 of the following year. You spread the income evenly across two calendar years. There is no tax advantage to deferring the first RMD unless your income in year one is unusually high and you expect year two to be lower — a rare situation for retirees whose income is relatively stable.

The only scenario where deferral makes sense: you have a large capital gain or one-time income event in the year you turn 73 that pushes you into a high bracket regardless. Deferring the first RMD avoids stacking it on top of that spike. But even then, you are trading a known bracket problem in year one for a known double-distribution problem in year two. Run both scenarios through tax software before deciding.

Pre-RMD Roth conversions: shrinking the problem permanently

The double-withdrawal trap is a symptom of a larger issue: large traditional IRA balances that generate large mandatory distributions. The structural fix is reducing the traditional IRA balance before RMDs begin through Roth conversions under IRC 408A.

The optimal conversion window is the gap years between retirement (or your last year of high W-2 income) and your RMD beginning age. If you retire at 63 and your RMD age is 73, you have 10 years to execute conversions. The strategy:

• Estimate your annual income in retirement before RMDs (Social Security, pension, taxable investments)
• Identify the top of your current tax bracket (e.g., $201,050 for the 22% bracket MFJ in 2026)
• Convert enough traditional IRA balance each year to fill the bracket without crossing into the next one
• Pay the conversion tax from non-IRA funds (taxable brokerage, savings) to maximize the Roth balance

For David and Karen, if they had retired at 65 with a $1.4 million traditional IRA and $60,000 in pre-RMD annual income, they could have converted approximately $108,000 per year for eight years to fill the 22% bracket ($201,050 − $60,000 − $32,300 standard deduction = approximately $108,750 of conversion room). Total converted: $864,000. Federal tax on conversions: approximately $190,000 at the 22% rate. Remaining traditional IRA at 73 (after conversions and assuming 6% annual growth on the declining balance): approximately $450,000. Age-73 RMD on $450,000: $16,981 instead of $45,283.

Even the double-withdrawal scenario becomes manageable: $16,981 + $17,647 = $34,628 in one year instead of $90,773. No bracket jump. No IRMAA risk. And the $864,000 in Roth grows tax-free with no RMDs for the rest of their lives.

Withdrawal sequencing: which account to tap first

RMD planning does not exist in isolation. The order in which you draw from tax-deferred (traditional IRA/401(k)), Roth, and taxable accounts determines your lifetime tax bill. The conventional wisdom — spend taxable first, then tax-deferred, then Roth last — is directionally correct but misses the conversion opportunity.

A more tax-efficient sequence for the gap years:

• Years 1–3 post-retirement (age 63–65): Spend from taxable accounts. Execute Roth conversions to fill the 22% bracket. If you need more income than taxable accounts provide, take from the traditional IRA beyond the conversion amount — this is still pre-RMD and voluntary.
• Years 4–10 (age 66–72): Continue conversions. Begin Social Security at 67 or defer to 70 depending on health and cash needs. Social Security replaces some taxable-account spending, preserving that balance for conversion-tax funding.
• Year 11+ (age 73+): RMDs begin on the reduced traditional IRA balance. Spend Roth funds for large expenses (home repair, travel, medical) to avoid spiking taxable income. Roth withdrawals do not count toward MAGI for IRMAA purposes and do not increase Social Security taxation.

The key insight: Roth funds are the only source of retirement income that is invisible to the IRS for purposes of bracket determination, IRMAA calculation, and Social Security taxation. Every dollar moved from traditional to Roth before RMD age removes a dollar from all three calculations permanently.

Social Security claiming and RMD coordination

Delaying Social Security from 62 to 70 increases your benefit by approximately 77% (8% per year of delayed retirement credits from full retirement age to 70, plus the actuarial reduction avoided by not claiming early). For a primary earner with a full retirement age benefit of $3,200/month, the age-70 benefit is approximately $3,978/month ($47,736/year). This higher benefit is guaranteed income that grows with inflation.

But higher Social Security benefits also mean higher taxable income when combined with RMDs. A couple with $47,736 in Social Security at age 70 plus $28,000 pension plus $45,283 in RMDs has a gross income of $121,019 — versus $91,283 if they had claimed Social Security at 62 ($25,000/year). The additional $22,736 in Social Security income is mostly offset by the higher benefit amount, but it interacts with IRMAA thresholds and bracket boundaries.

The coordination strategy: if you plan to delay Social Security to 70, the gap years between retirement and 70 are lower-income years — ideal for aggressive Roth conversions. You are trading higher taxable income now (conversion income) for lower taxable income later (reduced RMDs) at a time when your total income is at its lowest. Once Social Security and RMDs both begin, your income floor is set and your flexibility to manage brackets decreases significantly.

The 25% penalty: reduced but still real

SECURE 2.0 reduced the penalty for a missed or insufficient RMD from 50% to 25% of the shortfall, with a further reduction to 10% if corrected within the correction window (generally by the end of the second tax year after the RMD was due). This is a meaningful improvement, but a 25% penalty on a $45,283 RMD is still $11,321 — on top of the ordinary income tax owed on the distribution. File Form 5329 with your return if you missed an RMD, and take the corrective distribution promptly. The IRS has historically been willing to waive the penalty for first-time mistakes when corrected quickly.

401(k) still-working exception

If you are still employed at 73 and participate in your current employer’s 401(k), you can defer RMDs from that plan until April 1 of the year after you retire — the “still-working exception” under IRC 401(a)(9)(C). This does not apply to IRAs (traditional IRA RMDs are required regardless of employment status) and does not apply to 401(k) plans from former employers. If you are 73, still working, and have old 401(k) balances at previous employers, roll those into your current employer’s plan (if the plan accepts rollovers) to shelter them under the still-working exception. Alternatively, roll them into an IRA — but then RMDs begin immediately.

Key takeaways

• The April 1 first-year RMD deferral forces two distributions in year two. For a $1.2 million traditional IRA, the double-withdrawal adds approximately $90,773 of income to a single tax return instead of spreading $45,283 across each of two years. The concentrated income can trigger bracket jumps, IRMAA surcharges ($1,700 to $4,200/year in additional Medicare premiums), and increased Social Security taxation.
• Take your first RMD by December 31 of the year you turn 73 — not April 1 of the following year. The only exception: your year-one income is unusually high due to a one-time event, making year two the lower-income year regardless.
• Pre-RMD Roth conversions during the gap years (retirement to age 73) are the structural fix. Converting $75,000 to $108,000 per year at the 22% rate permanently reduces the traditional IRA balance, shrinks future RMDs, and moves assets into an account with no lifetime RMDs and no MAGI impact.
• Withdrawal sequencing matters: spend taxable accounts first, convert traditional to Roth during low-income years, and preserve Roth for post-RMD spending. Roth withdrawals do not count toward IRMAA thresholds or Social Security taxation — they are invisible income for bracket management.
• Coordinate Social Security claiming with conversion timing. Delaying Social Security to 70 maximizes the guaranteed benefit but also raises post-RMD income. Use the years before claiming to execute conversions at the lowest possible tax rate.
• SECURE 2.0 reduced the missed-RMD penalty from 50% to 25% (10% if corrected within the correction window). File Form 5329 and take corrective distributions promptly if you miss a deadline.