How do I reduce my required minimum distributions (RMDs)?

June 16, 2013
Age 65 Total assets >4 million. Three million + in both IRA and deferred or tax free products. Current tax rate less than 15%.2.3 million in IRA.Other than roth conversions or spending IRA now, are there any other options to reduce RMD's when I am 70.5

Advisor answers

An idea you can consider when you reach age 70½ is IRA to charity transfers. This allows you to transfer the RMD to a charity, but not have to pay taxes on the distribution. Granted, this is a strategy to apply once you reach 70 1/2 and congress may change the rules by then. (There was a debate before it was decided to renew it for 2013) But if you have charitable intent and have enough to live on without the RMD payment, it would be an option to consider.

The other advantages of this strategy is allows you the flexibility of stopp...

Jeff Vistica

Jeff Vistica


While I will provide a few thoughts from a wealth advisor’s perspective, I would encourage communication with your wealth advisor, CPA and tax/estate planning attorney to develop a plan to address the planning and tax implications.

Depending on your own goals, considering charitable donations may make sense depending on the eligibility of your assets. Many charitable planning structures exist (i.e., charitable remainder trusts, donor advised funds, etc.) that would bring you both tax benefits and perhaps help you fulfill any c...

Brian Frederick

Brian Frederick


The other straightforward answer to your question would be to have your sole beneficiary for your IRAs be a spouse who is more than ten years younger than you. This allows you to move from a Single Life Expectancy to a Joint and Last Survivor Expectancy which results in a smaller RMD amount. How small depends on the age of your spouse.

While this option probably isn't realistic for most people, I would pose a question back to you: What is truly important to you about reducing your RMD amount?

Like Jeff mentioned in his...

There are several ways you can reduce your RMDs over time. You have already identified the most obvious and effective (Roth and regular withdrawals). Some of the other advisors have accurately identified other minor strategies:

· Charitable giving – If you were already over 70 1/2, you could make QCDs from your IRA of up to $100k. But you have several years yet and this provision must be renewed. Currently, you could offset taxable distributions with charitable giving (assuming you itemize, don’t exceed the giving limit and a...

In addition to the excellent answers given by others (especially Benjamin Gurwitz), including the following options:

Charitable Giving

Marry a Younger Spouse

Asset Location (low-growth in IRA, high-growth in taxable/roth accounts)

Roth conversions (which do mean paying more taxes now, and if this pushes you into a higher current bracket, possibly not a great idea, tough estate-tax issues may become relevant and a great reason to consider pre-paying taxes via Roth conversions)

There is one more really big way to reduce/postpone RMDs: ...

Guy Baker

Guy Baker


Yes - consider a lifetime annuity. This would make the payments less than your RMD over your lifetime.

There is a unique strategy some have used which can eliminate your IRA and RMD. Essentially, you would put the money into a profit sharing plan and have the plan contribute systematically, capital to a life insurance policy.

You remove the policy from the plan by buying it out for the appraised value. This has the added advantage of providing a significant death benefit but it also gives you the ability to take tax free income on...

Dave Anthony

Dave Anthony


What a great problem to have....too much money!!

1st off--realize that you didn't get $4 million by accident, you made wise decisions to get that money, and you need to make wise decisions to keep as much of it as possible.

2nd- Just because the IRS is telling you that you have to take a RMD, doesn't mean you have to pay taxes on it. With $4 million to work with, you have options. You may need to think outside the box a little bit on this, but it can be done. You can have your cake and eat it too!

The problem is obvious: $2.3 million IRA...

Your current situation begs for a financial plan with a strategy for accomplishing this and other goals I am sure you must have. You've already ruled out my best suggestion, but I'm going to make the case for a Roth conversion, anyway.

You can expect your investment portfolio, if properly diversified and managed (which I strongly doubt it is) to grow over the long term upwards of 8% annually. That is below the historical norm, by the way. The longer you wait to move into a Roth, the higher your RMD will be. Bear market events occur, ...