Every Retiree With an IRA Must Know This RMD Rule at 73 (One Move Cuts Your Tax)

Your required minimum distribution (RMD) at 73 is taxable income, it can make your Social Security taxable, and missing it costs a 25% penalty. But the IRS also allows one move, the qualified charitable distribution (QCD), that cut Walter's federal tax from $2,675 to $586 in our example. In this video you will see the exact RMD formula, the first-year April 1 trap, and the QCD rules that trip people up. Every number comes from the IRS itself. We follow two fictional people. Walter is 75, single, with an $800,000 traditional IRA and $30,000 a year from Social Security. Linda turns 73 this year, with a $500,000 IRA and her very first RMD. What you will learn: 1) RMDs start the year you reach age 73 on traditional IRAs and workplace plans, and a Roth IRA has no RMD while you are alive, 2) the formula: your December 31 balance divided by a factor from the IRS Uniform Lifetime Table (26.5 at 73, 24.6 at 75, 20.2 at 80, 16.0 at 85, 12.2 at 90), so Walter takes $800,000 / 24.6 = $32,520 and Linda takes $500,000 / 26.5 = $18,868, 3) the trap: your first RMD can wait until April 1 of the next year, but then you take two in the same year, like Linda's $18,868 + $20,000 = $38,868, 4) the penalty: 25% of the amount you did not take ($8,130 on Walter's RMD), or 10% if you fix it in time, reported on Form 5329, 5) how an RMD pulls your Social Security into the tax: Walter's income becomes $48,512 and his federal tax is $2,675, 6) the QCD: from age 70 and a half you can send money straight from your IRA to a charity, up to $108,000 in 2025 and $111,000 in 2026 per person, it counts toward your RMD and it is not counted as income, 7) Walter's $10,000 QCD cuts his tax to $586, saving $2,089, and the share of his Social Security that is taxed drops from 53% to 25% (the $10,000 goes to charity, so this works best if you already planned to give), 8) the QCD rules: the trustee must pay the charity directly, traditional IRAs only (not an ongoing SEP or SIMPLE IRA), get a receipt, no second deduction, and mark the QCD box on Form 1040, 9) several IRAs, 401(k)s, working past 73, and how withholding works (10% by default) with Form W-4R. CHAPTERS 0:00 The RMD nobody explains: Walter's $32,520 0:25 Meet Walter and Linda 0:49 Every number comes from the IRS 1:13 Part 1: who must take an RMD 1:38 The formula: balance divided by factor 2:03 Walter's RMD: $32,520 2:21 Linda's first RMD: $18,868 2:45 The April 1 trap: two RMDs in one year 3:09 The 25% penalty (and the 10% fix) 3:33 How an RMD taxes your Social Security 3:59 Walter's tax return: $2,675 4:22 The QCD trick: give straight from your IRA 4:45 Walter's tax after a $10,000 QCD 5:12 Walter saves $2,089 (the honest trade) 5:37 The QCD rules that trip people up 6:01 Several IRAs, 401(k)s and still working 6:27 Withholding with Form W-4R 6:50 Your checklist before December 31 7:15 The 5-point recap 7:42 Share, comment and disclaimer WATCH NEXT Social Security at 62 vs 70: The $124,800 Mistake (Exact Math)    • Social Security at 62 vs 70: The $124,800 ...   SOURCES Internal Revenue Service (irs.gov): Publication 590-B Distributions from Individual Retirement Arrangements (IRAs), Retirement Plan and IRA Required Minimum Distributions FAQs, Publication 915 Social Security and Equivalent Railroad Retirement Benefits, Form 5329, Form W-4R, Publication 6142 Additional Deduction for Seniors, Revenue Procedure 2025-32 and Notice 2025-67 (2026 inflation adjustments and limits) Disclaimer: This video is for education only and is not financial, legal, tax or medical advice. Walter and Linda are fictional examples, and the dollar results are simplified federal income tax examples before credits. Rules, amounts and ages change and differ by person and by state. Always confirm with the IRS or a qualified tax professional before you act. This channel is not affiliated with the IRS or the Social Security Administration. Subscribe to The Money Backstory for more clear explanations of retirement for Americans over 50:    / @themoneybackstoryusa   #RMD #RequiredMinimumDistribution #RetirementTaxes