For many retirees, one of the most significant tax considerations in retirement planning revolves around Required Minimum Distributions (RMDs). These mandatory withdrawals from retirement accounts can have major implications for income tax, estate planning, and long-term wealth management—especially for couples who have accumulated substantial assets and do not rely on RMD income to meet their living expenses. Understanding how RMDs work, when they begin, and how to strategically manage them can help Massachusetts couples preserve wealth and minimize unnecessary tax burdens.

What Is an RMD?
A Required Minimum Distribution is the minimum amount that must be withdrawn each year from tax-deferred retirement accounts, such as traditional IRAs, 401(k)s, 403(b)s, and other qualified plans. Because contributions to these accounts were made with pre-tax funds, the IRS eventually requires distributions to ensure that taxes are paid on those funds.

When Are RMDs Required?
As of current federal law, individuals must begin taking RMDs starting at age 73 (or age 75 if born in 1960 or later). The amount you must withdraw each year is determined by your account balance at the end of the previous year and your life expectancy factor, as defined by IRS tables. Failure to take an RMD can result in steep penalties—up to 25% of the amount that should have been withdrawn (though this can be reduced to 10% if corrected promptly).

What If You Don’t Need the RMD Income?
For many affluent couples, the annual RMD creates unnecessary taxable income that increases their overall tax burden, potentially pushing them into higher brackets and triggering additional taxes on Social Security or Medicare premiums. Fortunately, several strategies can help minimize these consequences:

• Qualified Charitable Distributions (QCDs): Individuals aged 70½ or older can donate up to $105,000 per person per year, or $210,000 per married couple, directly from their IRA to a qualified charity. The donation counts toward the RMD but is excluded from taxable income, making this an excellent strategy for charitably inclined couples who wish to reduce taxes while supporting causes they care about.
• Roth Conversions: Before reaching RMD age, couples can consider converting portions of traditional IRA funds into a Roth IRA, which is not subject to RMDs during the owner’s lifetime. Although the conversion triggers income tax in the year of conversion, it allows future growth and withdrawals to be tax-free, potentially reducing future RMD obligations and taxes for heirs.
• Spousal and Legacy Planning: Couples can take advantage of spousal rollover options when one spouse passes away, allowing the surviving spouse to treat the inherited IRA as their own and delay RMDs until they reach the required age. In addition, designating younger beneficiaries—such as children or grandchildren who are minors—can spread RMDs over longer life expectancies, extending tax deferral and preserving family wealth.

Other Ways to Distribute Wealth Efficiently
Couples who do not need RMD income often view this stage of life as an opportunity to transfer wealth strategically. Some effective estate planning approaches include:

• Funding Trusts: Establishing or contributing to a revocable or irrevocable trust can provide structure and control over how wealth is distributed to heirs while potentially reducing estate taxes.
• Annual Gifting: The IRS allows each individual to gift up to $18,000 per recipient (as of 2025) each year without incurring gift taxes. Married couples can combine this annual gifting allowance to $36,000 per person, an effective way to reduce taxable estates while supporting family members during their lifetime.
• Life Insurance Planning: Using RMD proceeds to fund a life insurance policy held in an irrevocable life insurance trust (ILIT) can remove policy proceeds from the taxable estate and provide tax-free benefits to heirs.

Common Questions About RMDs for Wealthy Couples

• Can I reinvest my RMD? Yes, but you must first withdraw the funds and pay any applicable taxes before reinvesting them in a taxable brokerage account.
• Do Roth IRAs have RMDs? No, Roth IRAs are not subject to RMDs during the owner’s lifetime, making them a key estate planning tool for wealth preservation.
• What about inherited IRAs? Under the SECURE Act 2.0, most non-spouse beneficiaries, with some exceptions, must withdraw the entire inherited IRA within 10 years, eliminating the “stretch IRA” strategy that once allowed for longer tax deferral. Proper beneficiary designations and trust planning can help manage this impact.

Integrating RMDs Into a Broader Estate Plan
Managing RMDs effectively requires more than simply meeting the IRS withdrawal requirements—it involves a coordinated approach that aligns tax, investment, and estate planning goals. For high-net-worth couples in Massachusetts, these decisions can affect not only annual income taxes but also long-term estate preservation and generational wealth transfer.