Jeremy Keil explains the 5 RMD (Required Minimum Distribution) mistakes in Retirement and how to avoid them.
A retiree recently called for help.
It was their first year taking Required Minimum Distributions. They had delayed their first RMD until April of the following year — which meant taking two distributions in one tax year. That part was allowed. In some cases, it can even be strategic.
But when they called their IRA custodian and asked, “How much should I withhold for taxes?” they were given the default answer: 10% federal withholding.
They assumed that must be right.
They ended up short on taxes by more than $10,000 — and owed penalties on top of that.
That situation wasn’t caused by breaking a rule.
It was caused by following the rule without a plan.
And that’s where most RMD mistakes begin.
I recently wrote an article for Kiplinger magazine titled “5 RMD Mistakes That Could Cost You Big-Time: Even Seasoned Retirees Slip Up” and for this week’s episode of the “Retire Today” podcast I decided to talk through each of these mistakes in detail.
Mistake #1: Waiting Until Age 73 to Create a Plan
Turning 73 is not a strategy.
If you wait until the government forces your first RMD to think about it, you’ve already missed years of opportunity. The window between retirement and RMD age is often the most flexible tax-planning period of your life.
In those years, you may have:
That’s prime territory for intentional tax planning. Once RMDs begin, you’ve lost some flexibility.
In the KEEP step of the Retirement Master Plan, tax timing matters. RMDs don’t happen in isolation. They interact with Social Security, pensions, and brokerage income. Planning ahead—sometimes a decade ahead—can dramatically change the long-term outcome.
Mistake #2: Failing to Make Use of Qualified Charitable Distributions (QCDs)
This one surprises me every year.
RMDs currently begin at age 73 (moving to 75 for those born in 1960 or later). But Qualified Charitable Distributions still start at 70½.
That means you can send money directly from your IRA to a charity before RMDs even begin.
Many retirees continue writing checks to charities from their checking account, hoping for a deduction. With today’s larger standard deduction, many people don’t itemize at all.
Going directly from IRA to charity is often more tax-efficient—and sometimes dramatically so.
If charitable giving is already part of your plan, the tax strategy should be part of it too.
Mistake #3: Doing the Wrong Tax Withholding
When retirees call their custodian to take their RMD, they’re often asked:
“How much would you like withheld for taxes?”
The default federal withholding is often 10% for IRAs and 20% for 401(k)s. Many people assume, “That must be right.”
I recently saw a retiree who delayed their first RMD until April of the following year—which meant taking two distributions in one year. They defaulted to 10% withholding.
They ended up underpaying taxes by more than $10,000 and owed penalties.
The custodian can’t provide tax planning. That’s not their role.
Before taking an RMD, you need to project:
Again, this falls under the KEEP step. Don’t let the default settings dictate your tax bill.
Mistake #4: Not Realizing How Your RMD Income Affects the Rest of Your Tax Return
RMDs don’t just increase taxable income.
Many retirees focus only on their marginal bracket. But the real issue is tax cost, not tax bracket.
An extra $20,000 RMD might not just be taxed at 22%. It could cascade into additional taxation elsewhere.
That’s why projections matter. You don’t want to discover these ripple effects after the fact.
Mistake #5: Forgetting That the M in RMD means ‘Minimum,’ not ‘Maximum’
The M in RMD stands for minimum.
It does not mean that’s the only amount you’re allowed to withdraw.
Sometimes taking more than the minimum makes sense—especially if it smooths taxes over multiple years.
RMDs are a rule. They are not a retirement strategy.
The Bigger Lesson
RMDs are not just a government requirement. They are a planning opportunity—or a planning hazard.
They affect your income plan (MAKE), your spending plan (SPEND), your tax strategy (KEEP), and even what you ultimately LEAVE behind.
The biggest mistake isn’t misunderstanding a rule.
It’s treating RMDs as an isolated event instead of part of a coordinated retirement master plan.
Because in retirement, small tax decisions compound just like investment returns may do.
And when handled intentionally, RMDs don’t have to derail anything at all.
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Jeremy Keil, CFP®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retirement Today blog and podcast, as well as the Mr. Retirement YouTube channel.
Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.
– Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
– “5 RMD Mistakes That Could Cost You Big-Time: Even Seasoned Retirees Slip Up” by Jeremy Keil, Kiplinger Magazine – https://www.kiplinger.com/retirement/required-minimum-distributions-rmds/rmd-mistakes-that-even-seasoned-retirees-can-make
– Create Your Retirement Master Plan in 5 Simple Steps – 5StepRetirementPlan.com
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