Experts Urge Retirees to Take RMDs at 73, Cite 10% Missed-Withdrawal Penalty

Q: What hidden rule makes converting your traditional IRA to a Roth account a costly mistake once your required distributions begin?

The costly trap is that once you are subject to required minimum distributions, your annual RMD must be taken out before any Roth conversion, and that RMD money cannot be converted. That rule works through a “first dollars out” principle. If you try to convert money from a traditional IRA before satisfying the year’s full RMD, the IRS treats the first amount distributed as the RMD, not as a conversion. Because RMD dollars are ineligible for rollover or conversion, putting them into a Roth can create an improper Roth contribution and extra tax headaches. The practical result is that Roth conversions become less efficient after RMDs begin. You must recognize the RMD as taxable ordinary income anyway, which raises your income before you can convert any additional amount. That can push more of the conversion into higher tax brackets and may also affect Medicare premium surcharges and the taxation of Social Security. The rule is broader than many retirees realize. If you own multiple traditional IRAs, you can aggregate the RMD across those IRAs, but you generally must satisfy the full combined IRA RMD before converting from any of them. Employer-plan RMDs, such as from a 401(k), are generally separate. That is why Ed Slott and other retirement tax specialists often say the better window for Roth conversions is before RMDs start, when you have more control over taxable income and can convert without the mandatory distribution getting in the way.

Q: Could a simple timing error with your charitable donations permanently ruin your chance to avoid hefty taxes on retirement withdrawals?

Yes — a timing mistake can wipe out the main tax benefit of a charitable IRA gift for that year, but it usually does not “permanently” destroy future opportunities. The key rule is that a qualified charitable distribution, or QCD, generally works best only if it is done before you take the same amount out of your IRA as a regular required minimum distribution. Ed Slott’s warning is practical: if you already withdrew your full RMD personally and then send money to charity later, that charitable gift generally cannot retroactively turn that earlier taxable withdrawal into a tax-free QCD. You may still give, but you likely lose the chance to exclude that amount from income for that year. Timing also matters at year-end. For a QCD to count, the transfer must go directly from the IRA custodian to an eligible charity and be completed by Dec. 31. If the money is paid to you first, or misses the deadline, it is generally treated as a taxable IRA withdrawal, not a QCD. Donor-advised funds, private foundations, and supporting organizations usually do not qualify. That said, the damage is usually limited to that tax year, not forever. You can still use QCDs in later years if you are age 70½ or older and follow the rules. For 2026, the annual QCD limit is $111,000 per IRA owner. The practical fix is simple: plan early, tell the custodian to pay the charity directly, and complete the QCD before taking taxable RMD withdrawals.

2 articles · Updated · Morningstar · Sep 24

April 1 remains the deadline for a first RMD after turning 73, but Ed Slott said delaying usually backfires by forcing two taxable withdrawals into the same year.
Multiple IRA owners can aggregate RMDs and satisfy the total from one account, while QCDs must be executed before an RMD to count toward the requirement and trim taxable income.
Roth conversions become less efficient once RMDs start because the required withdrawal must come out first and cannot be converted.
Secure 2.0 cut the missed-RMD penalty from 50% to 25%, and to 10% if corrected within two years; Slott said prompt fixes filed on Form 5329 often win waivers.
For 2026, the QCD limit is $111,000 per IRA owner, underscoring how withdrawal timing and charitable giving can shape retirees' tax bills.