If you are retired or nearing retirement, Required Minimum Distributions (RMDs) are one of the most critical and least understood parts of retirement planning. Many people view RMDs as a relatively straightforward IRS rule that dictates when withdrawals must begin and how much can be withdrawn. 
In practice, RMDs can impact how much you pay in taxes, how Medicare premiums are calculated, how Social Security benefits are taxed, and the stability of your retirement income over more extended time periods.
Whether you are preparing for retirement or already taking distributions, understanding how RMDs fit into your broader financial picture is an integral part of long-term retirement planning that impacts your financial security late in life.
At Fisher Financial Group, as Northbrook retirement planners, we focus on how RMDs, taxes, and income planning work together, enabling you to anticipate changes better and make more informed decisions throughout your retirement years.
How Are RMDs Taxed in Retirement?
Required Minimum Distributions are annual withdrawals that the IRS requires from most tax-deferred retirement accounts once you reach a certain age. Under current rules, most individuals must begin taking RMDs at age 73. The IRS calculates the required amount each year using:


Your prior-year account balance


An IRS life expectancy factor


Once RMDs begin, they must be taken every year. Missing an RMD, or withdrawing too little, can result in substantial penalties. 
Example: How an RMD Affects Taxes (Married Filing Jointly, 2026)
Let’s assume a married couple has $85,000 of retirement income and takes the 2026 standard deduction of $32,200. We’ll compare taxes with and without an additional $18,868 of RMD.
Without the RMD


Gross income: $85,000


Taxable income: $52,800


Federal income tax: $5,840


Effective tax rate: 6.87%


Marginal tax bracket: 12%


With the RMD


Gross income: $103,868


Taxable income: $71,668


Federal income tax: $8,104


Effective tax rate: 7.80%


Marginal tax bracket: 12%


Key Takeaways


The RMD adds $18,868 to income and increases federal taxes by $2,264.


The additional tax is almost entirely taxed at the 12% marginal rate.


In this example, the RMD does not push the couple into a higher tax bracket.


RMDs tend to increase tax brackets when income is already near the threshold of a higher tax bracket. For households closer to these limits, planning strategies such as earlier Roth conversions or Qualified Charitable Distributions may help mitigate the impact.
Why Does Planning for RMDS Matter for Retirement Planning?
For retirees working with a retirement planner in Northbrook, IL, projecting how RMDs interact with other income can help plan for tax payments and avoid unexpected changes in future retirement years. Many retirees are surprised to find that RMDs push their taxable income higher than expected, especially when most of their savings are held in tax-deferred accounts (IRAs).
For households working with a Northbrook tax planner, this is often one of the first areas reviewed when projecting retirement income into future years.
How Can RMDs Impact Medicare Premiums?
RMDs can increase Medicare Part B and Part D premiums because Medicare uses prior-year income to calculate these premiums.  Medicare premiums are based on income from earlier tax years. 
A larger RMD, even in a single year, may trigger income-related monthly adjustment amounts (IRMAA) later on. These higher premiums typically last for a full year. Because of this, RMD planning is often coordinated with healthcare planning as part of a comprehensive retirement planning strategy in Northbrook, IL.
Are There Ways to Manage the Tax Impact of RMDs?
While RMDs cannot be eliminated once they begin, planning strategies may help lessen their impact over time:


Roth Conversions Before RMDs Begin: One commonly evaluated strategy is converting portions of tax-deferred savings to Roth accounts before age 73. Gradual conversions may spread taxable income across multiple years rather than concentrating it later, which can influence future RMD amounts.




Qualified Charitable Distributions (QCDs): For individuals age 70½ or older with charitable interests, Qualified Charitable Distributions enable IRA funds to be transferred directly to qualified charities. These QCDs can:



Count toward RMD requirements


Stay outside taxable income


Help manage income used for tax and Medicare calculations



Why Retirement Withdrawal Sequencing Matters With RMDs
Retirement withdrawal sequencing matters because the order in which you withdraw money from different account types influences future RMDs, tax brackets, Medicare premiums, and how steady your income feels throughout retirement.
Most retirees hold savings in a mix of taxable accounts, tax-deferred accounts (such as traditional IRAs and 401(k)s), and tax-free accounts (such as Roth IRAs). Each account type is taxed differently, and Required Minimum Distributions apply only to tax-deferred accounts. How and when you use each bucket affects both current taxes and future RMD amounts.
How Poor Sequencing Can Increase RMDs
If early retirement withdrawals come primarily from taxable accounts while tax-deferred accounts are left untouched, balances in traditional IRAs and 401(k)s may continue to grow. When RMDs begin at age 73, larger account balances result in larger required minimum distributions (RMDs), which can push taxable income higher later in retirement.
This higher income may: 


Increase marginal tax brackets


Raise the taxable portion of Social Security


Trigger higher Medicare Part B and Part D premiums


Create uneven income from year to year


How Thoughtful Sequencing Can Help
Coordinating withdrawals across account types may help:


Spread taxable income more evenly over time


Reduce reliance on large RMDs later


Preserve flexibility to adapt to tax law or healthcare changes


Maintain a more consistent after-tax income


In some cases, you may take additional withdrawals or Roth conversions in lower-income years before RMDs begin. While this can increase taxes in the short term, it may reduce future RMDs and improve long-term income predictability.
Sequencing Is a Multi-Year Planning Decision
Withdrawal sequencing is not about finding a single “correct” order. It is a multi-year planning decision that depends on spending needs, tax considerations, market conditions, and healthcare costs. Reviewing sequencing regularly allows adjustments as circumstances change over time.
Why This Matters for Retirement Planning
RMDs are only one piece of the retirement income planning puzzle, but they interact with nearly every other distribution decision you will make. Viewing withdrawals strategically, rather than account by account, helps retirees understand how today’s decisions impact future taxes and income stability. For individuals working with a retirement planner, having a well-thought-out withdrawal sequence in place can support clearer expectations and fewer surprises as retirement progresses.
How Fisher Financial Group Helps With RMD Planning
At Fisher Financial Group, LLC, conversations with retirees often focus on how RMDs fit into the broader retirement picture. For those working with a retirement planner in Northbrook, IL, the discussion typically includes:


Projected RMD schedules


Tax bracket awareness


Medicare premium considerations


Charitable giving options


Withdrawal coordination across accounts


RMD planning is most effective when addressed several years before the distribution requirements actually begin. However, even retirees already taking RMDs may benefit from reviewing how those withdrawals align with their long-term retirement planning needs and goals.
Contact us to schedule an introductory conversation. The conversation is free and without obligation.

This content is for educational purposes and not individualized investment, tax, or legal advice. Annuity products and investment strategies involve limitations and tradeoffs. Consider consulting with a qualified professional and your tax advisor for guidance tailored to your specific situation.
          

About the author

Dan Fisher is a Registered Financial Consultant (RFC) and Federal Retirement Consultant (FRC) who has spent more than three decades guiding retirees and pre-retirees through tax-smart investing and income planning. As the founder of Fisher Financial Group, he brings a practical approach to helping clients make informed choices about their retirement.