3 Legal Ways to Avoid Your Required Minimum Distributions (RMDs)

It's easy to think of your retirement savings as your money. After all, you earned it. But when you turn 73, the government comes along to remind you that you still owe it a cut of the money in your tax-deferred accounts.

It does this by forcing you to take required minimum distributions (RMDs). These are mandatory annual retirement account withdrawals that vary based on your age and the amount of money in your account. If you fail to take out your RMD as scheduled, you'll pay a 25% penalty on the amount you should have withdrawn.

Often, RMDs aren't that big of a deal because the amount you're withdrawing for living expenses already covers it. But if you still need to take your RMDs and you really don't want to, you can use three strategies to avoid them without aggravating the IRS.

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1. Continue working

Typically, you must take RMDs beginning in the year you turn 73. But the IRS makes an exception for your workplace retirement plan if you're still working at age 73 and you own less than 5% of the company. In that case, you can delay your RMD from that account only until the year you retire.

However, you'll still have to take RMDs from any traditional IRAs you have and any old workplace retirement plans, unless you roll those over into your current workplace plan. You don't have to take RMDs from Roth accounts because you already paid taxes on these funds in the years you made the contributions. You don't owe the government any more of that money, so it has no reason to force you to withdraw it.

2. Take a qualified charitable distribution (QCD)

You may want to avoid RMDs so you don't have to deal with the larger tax bill these withdrawals can bring. Fortunately, the IRS gives you a way to satisfy your RMD requirement while avoiding the extra taxes. It's called a qualified charitable distribution (QCD).

You ask that your plan administrator send your RMD amount to a qualifying tax-exempt organization. It's important that the money is not distributed to you first -- it must go directly to the charity to count. If you do this, the government won't tax you on the QCD amount and it will consider your RMD satisfied for the year.

The maximum QCD you can make in 2025 is $108,000. Married couples can contribute up to $216,000 this year.

3. Do a Roth IRA conversion

Roth IRA conversions allow you to change your tax-deferred retirement savings into Roth retirement savings. The catch is, you must pay taxes on the converted amount in the year of the conversion. So if you want to move $10,000 from a traditional IRA to a Roth IRA, you must pay taxes on that extra $10,000 this year.

This might not be much help for you if you're trying to avoid your 2025 RMD. But doing a Roth IRA conversion now could help you reduce or even avoid RMDs in future years. The less tax-deferred savings you have, the smaller your RMDs will be.

Don't wait until the last minute

If you turned 73 in 2025, you technically have until April 1, 2026, to take your 2025 RMD. But everyone else only has until Dec. 31, 2025, to take theirs. You don't want to put yours off until the last minute in case there's some sort of error processing the transaction.

Remember that you're also free to take out more than your RMD if you need to. If you have no other use for the money, put it toward your holiday expenses. Or you could withdraw the funds and reinvest them until you need them.

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