Required Minimum Distributions — New York

The RMD for a given year is calculated by dividing the prior December 31 account balance by the applicable distribution period from the IRS Uniform Lifetime Table. For a 73-year-old, the distribution period is 26.5 years — meaning the RMD is approximately 3.77% of the account balance. The percentage increases each year as the distribution period shortens. For a 80-year-old, the distribution period is 20.2 years — an RMD of approximately 4.95% of the balance. The calculation is straightforward, but the planning implications are significant: a large pre-tax IRA balance at age 73 generates large RMDs that can push you into higher tax brackets for the rest of your life.

The years between retirement and age 73 are the most valuable planning window for RMD management. During this period, income is typically at its lowest — earned income has stopped, Social Security may not yet be claimed, and RMDs have not begun. This creates room in the lower tax brackets to execute ROTH conversions, drawing down the pre-tax IRA balance at a lower rate than you will pay once RMDs begin. The goal is to enter the RMD years with a smaller pre-tax IRA balance, reducing the forced distributions that can push you into higher brackets and increase Medicare premiums. Doug builds a multi-year ROTH conversion schedule during the pre-RMD window to achieve this.

For IRA owners age 70½ or older with charitable intent, a Qualified Charitable Distribution (QCD) is the most tax-efficient way to satisfy the RMD. A QCD transfers up to $105,000 per year (2024 limit, indexed) directly from the IRA to a qualified charity. The QCD counts toward the RMD but is excluded from taxable income entirely — unlike a regular IRA withdrawal followed by a charitable deduction, which still increases AGI and can trigger Medicare premium surcharges. For clients who give to charity regularly, replacing cash gifts with QCDs from the IRA can reduce their effective tax rate significantly.

The SECURE Act of 2019 eliminated the stretch IRA for most non-spouse beneficiaries, requiring inherited IRAs to be fully distributed within 10 years. There are no required annual distributions within the 10-year period for most beneficiaries — the account must simply be empty by the end of year 10. However, IRS proposed regulations issued in 2022 (and finalized in 2024) require annual RMDs in years 1 through 9 if the original owner had already begun taking RMDs. The rules for inherited IRAs are complex and have changed multiple times since 2019. Doug tracks the current rules and builds the distribution schedule for inherited IRA clients.

If you have multiple Traditional IRAs, the RMD is calculated separately for each account, but you can satisfy the total RMD by withdrawing from any one or combination of your IRAs. This aggregation rule provides flexibility — you can take the full RMD from the IRA with the worst investment options or the highest fees, leaving the better accounts to continue growing. The aggregation rule does not apply to 401(k) accounts — the RMD from each 401(k) must be taken from that specific account. Doug coordinates the RMD source across multiple accounts to align with the overall investment and tax strategy.