Many US retirees are using 1 overlooked trick to turn required minimum distributions into a non-issue in 2026

If you’ve spent decades saving for retirement, your IRA and 401(k) balances probably feel like a financial safety net. Watching those accounts grow can be reassuring. But without careful planning, even healthy retirement savings can morph into a ticking tax bomb.

That’s because the Internal Revenue Service (IRS) mandates withdrawals from these retirement accounts once you turn 73 (1). If you have six- or seven-figure balances, these required minimum distributions, or RMDs, can have a noticeable impact on your tax bill every year.

Here’s why this tax bomb matters andwhat you can do to diffuse it before it’s too late.

What makes RMDs so frustrating is that they force you to reverse decades of good financial habits. After an entire career of saving, investing and deferring taxes, it can be difficult to switch gears and start selling assets, making withdrawals and triggering tax liabilities.

Failing to plan for RMDs can be expensive, especially if your retirement accounts have grown substantially.

RMDs are calculated using your age and your account balance as of December 31 of the previous year. According to Fidelity, the IRS applies a life expectancy factor to determine how much you must withdraw in a year (2).

For example, if your account balance is $100,000 the year before you turn 73, the IRS uses a life expectancy factor of 26.5. That results in a required withdrawal of about $3,773.60. With a $500,000 balance, the RMD jumps to roughly $18,867.90.

Higher balances trigger larger withdrawals, which can easily push you into a higher tax bracket. That extra income, combined with other sources, can increase the taxation of Social Security benefits or raise Medicare premiums through income-related monthly adjustment amounts (3).

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If you fail to withdraw the required amount by the deadline, the penalty is steep. The IRS can charge 25% of the amount you should have withdrawn. Many investment platforms now offer tools that automate RMDs, helping retirees avoid missed deadlines and complicated calculations (4).