The RMD Time Bomb

Starting at age 73, the IRS forces you to take Required Minimum Distributions (RMDs) – with a brutal 50% penalty if you fail. This guide covers:

• New SECURE 2.0 Act rules
• Advanced tax reduction strategies
• How to use our calculator to optimize withdrawals

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RMD Rules (Updated)

Key Changes Under SECURE 2.0

• The RMD age is now 73 (rising to 75 by 2033) under the SECURE 2.0 Act.
• Reduced penalty for missed RMDs: 25% (was 50%) if corrected quickly
• Roth 401(k)s now exempt from RMDs

RMD Calculation Formula

RMD = Account Balance ÷ IRS Life Expectancy Factor

Example: $500K balance at age 75 = $20,833 minimum withdrawal

Use the IRS Uniform Lifetime Table to manually calculate your RMD

Under 59½? See early withdrawal costs here.

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Tax Optimization Strategies

Strategy 1: Bracket Management

Withdraw just enough to stay in 12% or 22% tax brackets.

Strategy 2: Roth Conversions

Convert traditional funds to Roth in low-income years. Roth conversions can save taxes in low-income years—Bogleheads’ guide explains the math.

Strategy 3: QCDs (Qualified Charitable Distributions)

Donate up to $100,000/year tax-free from your IRA after 70½. QCDs let you donate tax-free after 70½—IRS requirements here.

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Inherited 401(k) Rules

For Spouses

• Can treat as own IRA or take RMDs based on life expectancy

For Non-Spouses

• Must empty account within 10 years (no annual RMDs)
• Exception: Minor/disabled beneficiaries

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State Tax Considerations

Most Retirement-Friendly States

• Pennsylvania exempts retirement income—verify your state’s rules.
• Illinois: Exempts 401(k) withdrawals
• Mississippi: Low taxes + homestead exemptions

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Advanced Calculator Uses

Our tool helps retirees:

1. Project RMD amounts through age 90
2. Model Roth conversion scenarios
3. Calculate tax-efficient withdrawal sequences

Sample Output for Age 75:

• Account Balance: $600,000
• RMD Amount: $24,000
• Estimated Tax: $5,280 (22% bracket)
• Net Received: $18,720