If most of your retirement savings is sitting in an IRA or a 401k, you’re in the same position as most people who walk through our door. It’s money that’s grown for decades without being taxed — but eventually, it will be. The real question isn’t whether you’ll pay taxes on it, but when, how much, and on what terms. That’s what this article is about.

This is part of an ongoing series in which we walk through a full financial plan written for an example couple we call Tom and Susan. This is the fifth installment in an eight-part series, and it focuses specifically on the decisions made around their IRA and 401k.

Why the IRA Gets Its Own Section in a Financial Plan

It might seem simpler to fold IRA money into a broader investment and income strategy, but tax-deferred accounts come with their own set of rules that deserve dedicated attention. Three things in particular need to be addressed: required minimum distributions, qualified charitable distributions, and Roth conversions. Handle these well, and the rest of the plan tends to fall into place. Ignore them, and you risk ending up on what we call “the government’s plan” — a default that is rarely in your favor.

Required Minimum Distributions: Do You Know Your Age?

One of the most common questions we hear is, “What is my RMD age?” It’s a reasonable question, because the answer has changed multiple times in recent years. It used to be 70½. Then it became 72. Then 73. Now, depending on when you were born, it may be 75.

The current rule is straightforward: if you were born in 1959 or earlier, your RMD age is 73. If you were born in 1960 or later, your RMD age is 75. (This assumes you haven’t already started RMDs under an older rule — if you have, you don’t get to recalculate based on the newer age.)

In Tom and Susan’s case, Tom was born in 1958, which means he turns 73 in 2031. His first RMD is technically due by April 1, 2032, and his second is due by December 31 of that same year. Susan is a year behind him.

Why does this matter when 2032 is still years away? Because a financial plan needs to account for thirty years or more, and the timing of these distributions has to be built in from the start. There’s also a trap worth knowing about: the IRS allows you to delay your very first RMD until April 1 of the year after you turn 73. Some people take advantage of this. But doing so means you’ll end up taking two RMDs in that same calendar year — the delayed one from the prior year, plus the current year’s. That extra income, stacked into a single tax year, can push you into a higher bracket and create a larger problem than the one you were trying to avoid. Our general recommendation is simply to take the first RMD in the year you turn 73 or 75, and skip the April grace period altogether.

But Do You Even Need to Worry About RMDs?

Before getting into Roth conversions and other tax strategies, it’s worth stepping back and asking a more basic question: what are your income needs?

If most of your money is in an IRA and you’re already living off withdrawals from that account, there’s a good chance those withdrawals already satisfy your RMD requirement. In other words, you may not need to take any additional action at all. The first step in any IRA tax planning is figuring out how much income you actually need. Once that’s settled, you can look at what room is left for additional strategies like Roth conversions or charitable giving.

This order matters. We’ve seen people get so focused on minimizing taxes that they lose sight of the bigger picture, only to find themselves without enough income to live on comfortably. Income comes first. Tax strategy comes second.

Qualified Charitable Distributions: Giving That Works Double Duty

For Tom and Susan, charitable giving is part of who they are. At 67 and 66, they’re still a few years away from age 70½, which is when Qualified Charitable Distributions, or QCDs, become available. So why discuss this now? Because planning ahead is the point.

A QCD allows you to donate money directly from your IRA to a qualified charity — a church, a nonprofit, anywhere that qualifies as a 501(c)(3) organization. The money moves straight from the IRA to the charity and is never taxed to you. Considering that this money went in as a tax deduction, grew tax-deferred for years, and now comes out completely tax-free, it’s one of the rare corners of the tax code where money essentially escapes taxation altogether.

Once you reach RMD age, a QCD can also count toward satisfying your RMD — assuming you’re not already meeting that requirement through regular withdrawals for income. For Tom and Susan, the plan is to shift their existing charitable giving over to QCDs once they’re eligible, and potentially give more, knowing it’s coming out of the IRA in such an efficient way.

One important detail: QCDs only work from an IRA, not a 401k. If charitable giving money is sitting in a 401k, it would need to be rolled into an IRA first to take advantage of this strategy. It’s also worth noting that recent tax law changes, starting in 2026, allow married couples to deduct up to $2,000 in charitable contributions even while taking the standard deduction — a meaningful shift for people who give but don’t itemize.

Roth Conversions: The Big Question

This is the part of the plan that tends to generate the most interest, and for good reason. The first question is simple: yes or no, do you want to do Roth conversions? For Tom and Susan, the answer was yes. The harder questions are how much, and how often.

There’s a balancing act here. Spreading conversions out over time helps smooth out the tax impact. But doing conversions earlier — in the 60s and early 70s — has the added benefit of reducing future RMDs, since it shrinks the balance on which those RMDs are calculated. And once an RMD is required for a given year, that portion can’t be converted to a Roth. It has to come out as ordinary income.

For a typical couple, conversions are often planned up to the top of the 24% married filing jointly tax bracket — currently around $403,000 in taxable income. If a couple’s income is, say, $180,000, that leaves roughly $250,000 of room to convert at a maximum rate of 24%.

For Tom and Susan, the approach was more conservative. Conversions were capped at $218,000, which corresponds to the IRMAA threshold — the income level above which Medicare Part B premiums increase. This wasn’t an arbitrary choice. Because of Tom’s work as a physician at a small practice without credible coverage, the couple was forced onto Medicare at 65 and has been paying elevated premiums ever since. Avoiding any further increase mattered to them.

The plan, then, was to convert enough each year to stay just under the IRMAA threshold without crossing into higher Medicare premiums. The projections showed this approach leaves their kids more than $500,000 better off, assuming a 30% terminal tax rate on any traditional IRA money left behind. The exact figure carries a lot of assumptions, but directionally, it shows the strategy is meaningfully better than doing nothing. Under this plan, conversions continue gradually into their early 80s, after which their income settles comfortably under the 12% tax bracket for the rest of their lives.

A faster alternative was also considered: converting at the top of the 24% bracket instead. This would finish the conversions in just three or four years, but at the cost of higher taxes along the way and Medicare premium increases the couple was trying to avoid. When the two options were laid side by side, Tom and Susan preferred the slower approach. It kept them under the IRMAA threshold, kept them in the 22% bracket rather than the 24%, and left more money in the IRA longer — which also meant more years of QCD opportunities once they reach 70½.

To be clear, staying under the IRMAA threshold isn’t always possible or even the right call for every situation. A larger IRA balance or higher other income might mean going above that line makes more sense. But it’s always something worth examining.

The Widow’s Tax and the Bigger Picture

One of the less obvious benefits of Roth conversions has to do with what’s sometimes called the “widow’s tax.” When one spouse passes away, the surviving spouse moves to single tax filing status, which comes with significantly higher tax rates on essentially the same income. RMD amounts and IRA balances don’t change when a spouse passes away, but the tax brackets the survivor falls into do. Roth conversions completed while both spouses are alive can soften this blow by reducing the future RMD amount the survivor has to report as income.

Several other factors shape how Roth conversion decisions get made. Expectations about future tax rates matter — if rates are likely to rise, earlier conversions become more attractive. State income tax situations matter too, especially for anyone considering a move to a state without income tax. Where the money to pay conversion taxes comes from matters as well: paying from outside the IRA preserves more value inside the Roth account than paying from the converted amount itself.

There’s also the question of when Roth money will actually be needed. Because Roth accounts have no RMDs, they’re often the last assets spent and the best ones to pass on to heirs. Some people also think about the (admittedly unlikely) possibility that Congress could change the tax treatment of Roth accounts down the road — worth a passing thought, even if not a driving factor.

Charitable intent plays a role too. If giving to charity isn’t part of your plans, a QCD strategy isn’t worth pursuing for its own sake. And in more difficult circumstances, there’s the concept of a “deathbed” Roth conversion — in the year a spouse passes away, the couple can still file a joint return, which may allow for one larger, final conversion at more favorable rates. It’s not an easy conversation to have, but it’s part of what gets considered in these situations.

The Takeaway

None of this is locked in for the next thirty years. For Tom and Susan, really only the next year or two of conversion amounts are set. Every year going forward, the numbers get revisited — what’s changed, what the horizon looks like, and whether adjustments make sense. That’s the nature of this kind of planning. It isn’t a one-time decision; it’s an ongoing process.

But having a framework matters. Knowing your RMD age, understanding how QCDs and Roth conversions work together, and thinking through how these decisions affect your spouse, your taxes, and ultimately your kids — that’s what turns “the government’s plan” into your plan.

The full financial plan written for Tom and Susan, including the complete IRA and 401k section discussed here, is available in the show notes at cardinalguide.com. This is episode five of an eight-part series, and the other episodes are available as well.