I Won't Let RMDs Get Me Down. Here's How I Plan to Manage Them.

When I first started contributing to a traditional IRA in my early 20s, I thought I was making a smart move. And to be fair, I was.

Contributing to a retirement account from a young age is a great way to accumulate a respectable nest egg over time. And funding my IRA that young has taken a lot of pressure off.

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But while I definitely enjoyed the tax break that came with contributing to a traditional IRA, I'll admit I made a bit of a mistake. What I actually should've done in my early 20s was fund a Roth IRA instead.

I chose a traditional IRA because I wanted the tax break on my contributions. But since my income and tax bracket weren't particularly high back then, a Roth IRA would've made far more sense.

Since I have all my retirement savings in a traditional IRA, I'm resigned to the fact that I may be required to take required minimum distributions (RMDs) in retirement. Because of when I was born, those RMDs won't kick in until age 75. But from there, I may be looking at some pretty big financial consequences.

Still, I refuse to let RMDs get me down. Instead, I plan to make the most of them while keeping them manageable.

Minimizing the pain

I'm hoping that by the time I'm set to retire, I'll have accumulated an even larger retirement plan balance than what I have today. In that case, it may not be feasible for me to do a complete Roth conversion and avoid RMDs entirely.

But actually, that's not my goal. It can be advantageous to have some taxable income in retirement, especially if you're hoping to support charitable causes, which I'd love to be able to do.

Plus, we never know what tax breaks might come down the pike that rely on having taxable income to offset. So a complete Roth conversion isn't part of my plans.

I do, however, hope to pull off a partial Roth conversion. If I have a period of time when my income drops before RMDs begin, I can try to strategically transfer money from my traditional retirement savings to a Roth IRA.

Any money I manage to sneak into that Roth IRA won't be subject to RMDs. And even if I take withdrawals, they won't count toward my taxable income, so that's a win.

Putting those forced withdrawals to good use

Even with a solid Roth conversion strategy, I'm pretty resigned to taking RMDs. So I figure I have a choice.

I could get upset about those forced withdrawals and the associated tax bill. Or I could tell myself that I have an opportunity to treat myself to various things without feeling guilty.

Here's how I see it. I might hesitate to drop $200 at a fancy restaurant because I know that sum of money could buy my family a week's worth of groceries instead. But if someone hands me a $200 gift card to a fancy restaurant, I won't feel guilty about using it.

I view RMDs the same way. If the IRS is going to insist that I raid my retirement savings, I'm not going to cry about it when I can find a great way to spend that money, whether it's travel, new furniture, or something else.

You don't have to bemoan RMDs

It's understandable that a lot of people gripe about taking RMDs. After all, you saved that money. Shouldn't you get to decide when to withdraw it? But if you're going to be forced to take RMDs, consider it an invitation to spend money on things you love.

Of course, you will have to plan for the potential financial consequences, which could include higher taxes and surcharges on your Medicare premiums. But as long as you know what to expect, you can embrace the opportunity to indulge.

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