For many retirees, taxes don’t disappear—they simply change shape.
One of the most important (and often overlooked) changes comes from something called Required Minimum Distributions, or RMDs. If much of your retirement savings sits in pre-tax accounts like IRAs or 401(k)s, this shift can create what’s often referred to as a “tax buildup” over time.
And eventually, that buildup needs to be addressed.
What Are RMDs—and When Do They Start?
RMDs are mandatory withdrawals from certain retirement accounts, established by the Internal Revenue Service.
As of today, they generally begin at age 73.
Once they start:
- You must withdraw a calculated amount each year
- That amount is taxed as ordinary income
- The required withdrawal amount increases over time
Failing to take RMDs can result in penalties, which is why understanding the rules ahead of time matters.
Why This Can Become a Problem
During your working years, pre-tax retirement accounts offer valuable benefits:
- Contributions reduce taxable income
- Investments grow tax-deferred
But later in retirement, the story can change.
Those same accounts may:
- Generate larger-than-expected taxable income
- Push you into higher tax brackets
- Increase Medicare premiums through IRMAA (Income-Related Monthly Adjustment Amount)
For many households, this realization comes as a surprise:
“We did everything right—so why are taxes higher now?”
The answer often comes down to timing and coordination.
Why This Matters for Both Spouses
Tax planning in retirement isn’t just about numbers—it’s about life transitions.
When one spouse passes away:
- Filing status typically changes from married to single
- Tax brackets become less favorable
- The same income may now be taxed at higher rates
At the same time, RMDs continue—and may even increase depending on account structure.
Without planning, the surviving spouse could face:
- Higher overall tax rates
- Less flexibility in managing withdrawals
- Increased pressure on retirement income
This is why coordinated planning across both lifetimes is so important.
How Many Families Take a Proactive Approach
Rather than waiting for RMDs to begin, some households choose to plan ahead.
This doesn’t mean avoiding taxes entirely—it means being intentional about when and how they occur.
Common strategies people explore include:
- Taking gradual withdrawals earlier in retirement
- Evaluating Roth conversion opportunities
- Coordinating income across multiple years
- Managing tax brackets more deliberately
The goal is simple: Reduce surprises and increase flexibility later on.
A Simple Question to Consider
If your required withdrawals started today, would you feel comfortable with the tax impact?
If the answer is “I’m not sure” or “probably not,” you’re not alone—and it may be worth exploring your options sooner rather than later.
Why Early Planning Matters
The years between retirement and RMD age can offer a unique window of opportunity.
During this time:
- Income may be temporarily lower
- Tax brackets may be more manageable
- There may be more control over how income is recognized
This period is often where thoughtful planning can make the biggest difference—not by eliminating taxes, but by helping smooth them out over time.
Bringing It All Together
At Longview Insurance & Investments, the focus is on helping families connect the dots across retirement income, taxes, and long-term planning decisions—so nothing is considered in isolation.
Because retirement isn’t just about how much you’ve saved.
It’s about how efficiently—and sustainably—you use it.
What to Do Next
If a large portion of your savings is in pre-tax accounts, reviewing your future RMD exposure could be an important step toward greater clarity.
Every household’s situation is different. The right approach depends on your goals, income needs, and long-term priorities.
If you’d like to explore how this applies to your unique situation, we invite you to schedule a conversation with our team.
Together, we can help you evaluate your options and coordinate a plan designed to support flexibility and confidence throughout retirement.
Sources:
- Internal Revenue Service – https://www.irs.gov
- AARP – https://www.aarp.org
- Fidelity Investments – https://www.fidelity.com
- Schwab Center for Financial Research – https://www.schwab.com
- Morningstar – https://www.morningstar.com