Turning 73 is more than a birthday milestone.
For many retirees, it’s also the year new tax rules begin. At that age, the IRS requires withdrawals known as required minimum distributions, or RMDs, from most tax-deferred retirement accounts.
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Those withdrawals count as taxable income. They can affect tax brackets, Social Security taxation and Medicare premiums. That makes planning especially important this year.
Here are five tax moves to consider the year you turn 73.
1. Review Your Portfolio
A milestone birthday is a good time for retirees to take a closer look at their retirement accounts and overall income plans.
“Turning 73 triggers required minimum distributions from most retirement accounts, creating a predictable but often substantial taxable event,” said Christopher Stroup, founder and president of Silicon Beach Financial.
Since those withdrawals count as taxable income, reviewing account balances ahead of time can help retirees understand how RMDs may affect their overall tax picture, he said.
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2. Manage Taxable Income
RMDs can increase a retiree’s taxable income, even if their lifestyle or spending haven’t changed. As Stroup said, “RMDs increase taxable income, often moving retirees into higher marginal tax brackets.”
The IRS treats those withdrawals as ordinary income. That can accelerate taxation on Social Security, trigger higher Medicare premiums and limit future tax-planning flexibility, he added.
3. Consider Roth Conversions
Stroup said retirees should look at Roth conversions before or around the time RMDs begin.
A Roth conversion moves money from a traditional retirement account into a Roth IRA. The taxes are paid now, but future withdrawals can be tax-free.
“Consider Roth conversions in lower-income years, partial distributions to spread taxable income, and timing withdrawals from taxable versus tax-deferred accounts,” Stroup said. “Planning ahead allows you to smooth income, reduce long-term taxes and avoid taking RMDs that might otherwise push you into costly brackets.”
4. Watch Medicare Premiums
Medicare premiums can rise when retirement income crosses certain thresholds.
“IRMAA is tied to modified adjusted gross income,” Stroup said. “Large RMDs can push retirees above key thresholds, increasing monthly Medicare premiums.”
Those income-related adjustments also can raise monthly costs for Medicare Part B and Part D.
Stroup said coordinating withdrawals, Roth conversions and other income sources can help retirees manage IRMAA exposure and protect after-tax retirement cash flow.
5. Plan Withdrawals
One of the most common mistakes retirees make, Stroup said, is waiting until the RMD deadline without planning.
“Many retirees take the full distribution all at once, triggering higher taxes and IRMAA penalties,” he said. “A disciplined, preemptive strategy, spreading withdrawals or conversions, prevents unnecessary tax surprises and preserves long-term retirement flexibility.”
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This article originally appeared on GOBankingRates.com: 5 Tax Moves To Consider the Year You Turn 73
