5 things you need to know about required minimum distributions this year
From bigger withdrawal amounts to smart tax and portfolio moves, these developments related to required minimum distributions are worth a closer look
Required minimum distributions are unwelcome for many high-income retirees because of the implications for their tax bills. RMDs are taxed as ordinary income and can have knock-on tax effects, leading to more tax on Social Security benefits and higher Medicare costs.
The good news is that the RMD starting age has been sliding upward. It was stuck at 70.5 through 2019, but the original Secure Act moved it to 72 in 2020. Secure 2.0 extended the starting RMD age to 73 in 2023, and the RMD age will move up to 75 starting in 2033.
Here’s what RMD-subject investors should have on their radars now.
1. RMDs will be high again this year
If you need to take an RMD for the 2026 tax year, your RMD amount was effectively “cooked” at the end of 2025. That’s because you look back to your Dec. 31 balance from the previous year to determine the RMD amount for the current year. 2025 was an excellent year for nearly every major investment type. Moreover, RMD percentages adjust upward as we age, also contributing to higher withdrawal amounts. The only time your RMD amount won’t be higher than the previous year’s will be if your portfolio has lost value.
2. But they won’t cause you to overspend
Many retirees worry that RMDs could cause them to prematurely deplete their portfolios. Required minimum distributions start comfortingly low at age 73 — dividing portfolio value by a life expectancy of 26.5 years translates into a 3.77% withdrawal when RMDs commence. But then RMDs ramp up: RMDs for 80-year-olds are close to 5%, and they’re 6% for people age 85.
That’s well above the 4% guideline, but retirees shouldn’t be fearful that RMDs will cause them to overspend for a few key reasons. The main one is that older adults can reasonably spend a higher percentage of their portfolios as they age without fear of running out: In our 2025 retirement spending research, we put safe withdrawal rates for people with 20-year time horizons (for example, 75-year-olds) at 5.3%, and our safe withdrawal rate was nearly 7% for people with 15-year time horizons (for example, 80-year-olds).
3. You can always reinvest RMDs
You don’t have to spend your RMDs. You do need to withdraw the correct amount from your tax-deferred accounts and pay taxes on those withdrawals, but you can reinvest the funds. Most RMD-subject investors are no longer working, but if you or your spouse happen to be, you can reinvest all or part of the withdrawal back into an IRA, up to the contribution limit ($8,600 in 2026 for people over 50) or your amount of earned income, whichever is lower. If you don’t have earned income, you could always plow the money into a taxable brokerage account.
4. You can use your RMDs to improve your portfolio
If you’re subject to RMDs in 2026, one strategy that should be a priority is using your withdrawals to improve your portfolio. By targeting specific holdings for withdrawals rather than pulling your RMDs pro rata from all of your positions, you can address any number of portfolio problem spots, especially overconcentration in specific asset classes, sectors, or holdings.
5. You can employ strategies to reduce RMDs
There are ways to help reduce RMDs — or at least the taxes that you’ll owe on them.
If you’re still contributing to your retirement accounts, you might consider directing new money to Roth rather than traditional tax-deferred accounts; Roth accounts don’t have RMDs. The trouble is, if you’re in the late stages of your career and in your peak earning years, it might be better to take the tax break on traditional tax-deferred contributions rather than prioritizing Roth. Ask your adviser.
If you’re retired but not yet subject to RMDs, explore strategies to reduce your future RMDs, like converting traditional IRA assets to Roth in the postretirement, pre-RMD years, when incomes are low in many households because working income has stopped but RMDs haven’t started.
If you’ve started taking RMDs, take advantage of the qualified charitable distribution, which enables you to steer a portion of your traditional tax-deferred account — up to $111,000 per person in 2026 — to a qualified charity. You won’t owe taxes on the QCD amount, the QCD funds can help satisfy your RMD obligations for that year, and those amounts will also reduce your RMD-subject balances going forward.
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This article was provided to The Associated Press by Morningstar. For more retirement content, go to https://www.morningstar.com/retirement.
Christine Benz is director of personal finance and retirement planning for Morningstar and co-host of The Long View podcast. Subscribe to her free newsletter, Improving Your Finances.
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