A practical guide for when the IRS says, “It’s time.”
If you’ve saved diligently over the years, there’s a good chance you have money in tax-deferred accounts like IRAs or old 401(k)s. These accounts have been growing without taxes getting in the way—until now.
At age 73, the IRS requires you to start withdrawing a portion of those funds each year. These are called Required Minimum Distributions, or RMDs.
While many people have heard of RMDs, we come across very few who have taken it on themselves to learn the ins-and-outs of the many rules and actions you need to take. What exactly is required? How much tax will you owe? What if you don’t need the income?
Let’s walk through what matters—and how to approach RMDs with clarity and purpose.
If you are a client of Covenant Wealth Management, consider this a primer. We initiate this planning conversation and handle the execution with you.
The Basic Components of An RMD
When you turn 73, the IRS begins requiring annual withdrawals from tax-deferred retirement accounts like:
Traditional IRAs
SEP and SIMPLE IRAs
401(k), 403(b), and similar employer-sponsored plans
You don’t have to spend the money, but you do have to move it out of the account and pay taxes on it as ordinary income.
The idea is simple: the IRS gave you a tax break on the front end, and now it's time to pay some of the postponed taxes back.
What's Changed: SECURE Act 2.0
Recent legislation made important updates to RMD rules. The SECURE Act 2.0, passed in December 2022, raised the age at which RMDs begin:
For individuals born between 1951–1959, RMDs begin at age 73
For those born in 1960 or later, the start age increases to 75 starting in 2033
This gives retirees more time to make strategic tax planning moves—such as Roth conversions—before RMDs begin. It also reinforces the importance of planning early, not just reacting when RMDs arrive. source: SECURE Act 2.0, Consolidated Appropriations Act, 2023.
While the rules may change, we stay consistent on one encouragement: RMDs don’t have to be just a tax rule—they’re an opportunity to bring more intentionality into your financial plan.
How to Use RMDs Well
Whether you need the income or not, RMDs can serve multiple purposes. Here are a few thoughtful ways our clients choose to use them:
1. Reinvest in a Taxable Account
If you don’t need the cash flow right now, you can take your RMD and reinvest it in a regular investment account. This keeps your money working while giving you more flexibility going forward.
2. Fund Personal Priorities
Some clients use RMDs to support the life they’ve worked hard to build—travel, home renovations, or intentional gifts to children or grandchildren.
3. Give to Causes That Matter
We’re blessed to serve many generous families, and RMDs represent an excellent tax-advantaged charitable opportunity. You can send up to $100,000 per year directly from your IRA to a qualified charity using a Qualified Charitable Distribution (QCD).
This keeps the income off your tax return entirely and supports organizations you care about.
A Few Questions to Guide Your Next Step
When RMDs come into play, we often walk clients through a few clarifying questions:
Do I actually need this income—or is this just a tax requirement?
Would a QCD align with my current giving goals?
Could I adjust withdrawals from other accounts now that RMDs have started?
Should I withhold taxes from my RMD to simplify estimated payments?
What impact will this have on my overall tax picture?
Final Thought: RMDs Are Just a Chapter, Not the Whole Story
Required Minimum Distributions don’t have to be a disruption. With a little planning, they can become part of the broader strategy—supporting your goals, reducing surprises, and even amplifying your generosity.
If you’re turning 73 soon—or just want to get ahead of this chapter—we’re here to help.
As always, if you know someone who would benefit from this resource, please pass it along. Let’s help initiate conversations that benefit those we care about.