High-earning retirees often view required minimum distributions unfavorably because of their significant tax consequences. Because RMDs are taxed as ordinary income, they can trigger secondary financial burdens, such as higher taxes on Social Security benefits and increased Medicare expenses.
Fortunately, the required age to begin these mandatory withdrawals has progressively increased over recent years. Held at 70.5 through 2019, the initial Secure Act shifted the requirement to 72 in 2020. Secure 2.0 subsequently raised the threshold to 73 in 2023, and the starting age is slated to reach 75 beginning in the year 2033.
Strong 2025 returns guarantee higher 2026 RMDs
Required minimum distribution obligations for the 2026 tax year were effectively established at the close of 2025. This is because mandatory withdrawal figures for any given year depend directly on the account balance from Dec. 31 of the prior year.
Almost every primary investment category performed exceptionally well throughout 2025, driving those balances up. Withdrawal percentages also increase as investors age, pushing required amounts even higher. Unless a portfolio has lost value, annual mandatory distribution amounts will inevitably rise.
Retirees shouldn't fear rising RMD withdrawal rates
Concerns that required minimum distributions will prematurely exhaust investment portfolios are widespread among retirees. Initially, RMDs start modestly at age 73, where dividing portfolio balances by a 26.5-year life expectancy yields a 3.77% initial withdrawal rate. However, these mandatory payouts accelerate over time: RMDs rise near 5% for individuals at age 80, and escalate to 6% once retirees reach age 85.
Although this pace exceeds the traditional 4% benchmark, retirees should not fear that mandatory distributions will force unsustainable spending. Older adults can comfortably spend a larger portion of their assets as they age without running out of money. In 2025 retirement spending research, safe withdrawal rates were calculated at 5.3% for individuals with 20-year time horizons, such as 75-year-olds. Meanwhile, safe withdrawal rates reached almost 7% for those facing 15-year horizons, typical for people aged 80.
You can reinvest unneeded RMD cash
Receiving required minimum distributions does not obligate you to spend those funds. Although removing the required amount from tax-deferred accounts and paying the taxes is mandatory, you can reinvest the remaining cash.
While most people taking RMDs are retired, anyone with an employed spouse or personal earnings can put money back into an IRA, up to $8,600 in 2026 for those over 50 or their earned income, whichever is lower. If you have no earned income, you can deposit the cash into a standard taxable brokerage account.
Use 2026 RMDs to rebalance your portfolio
For individuals required to take minimum distributions in 2026, using these mandatory payouts to refine an investment portfolio should be a primary strategic priority. Instead of taking proportional withdrawals across all positions, selectively selling targeted holdings can address a range of portfolio vulnerabilities, particularly heavy overconcentration in individual assets, specific market sectors, or broader asset classes.
Smart strategies can reduce RMDs and tax hits
Several strategies can help lower your required minimum distributions—or at least minimize the tax hit they create.
If you are actively saving for retirement, you could direct new contributions to a Roth account instead of a traditional tax-deferred option, since Roth balances do not require minimum withdrawals. However, workers nearing retirement in their peak earning years might benefit more from keeping the immediate tax savings of traditional tax-deferred accounts. You should consult your financial adviser regarding these specific decisions.
For retirees who have not yet reached the required withdrawal age, converting traditional IRA assets into Roth accounts can prove effective. Doing this during the window between ending employment and beginning distributions allows households to use temporarily lower income levels to reduce future obligations.
For those already required to make withdrawals, a qualified charitable distribution lets you transfer a portion of your traditional tax-deferred account—up to $111,000 per individual in 2026—directly to a qualifying charitable organization. You will not owe taxes on the transferred amount; the payout satisfies your annual distribution obligation and simultaneously lowers the total account balance subject to future required minimum withdrawals.
