If you have spent decades diligently saving in a 401(k), traditional IRA, or similar tax deferred retirement account, you have already done something most Americans never accomplish. You have built real wealth. But here is something the IRS does not want you to forget: that money was never fully yours to begin with.
Every dollar you put into a traditional retirement account came with an implicit agreement with the federal government: defer your taxes now, pay them later. And “later” arrives with something called a Required Minimum Distribution, or RMD.
For many Orlando retirees, RMDs represent one of the most misunderstood and most costly elements of retirement planning. Fail to take your RMD and the IRS hits you with a penalty that was historically 50% of the amount you should have withdrawn, recently reduced to 25%, and in some cases 10%. Take your RMDs without a strategy and you may find yourself pushed into a higher tax bracket, losing a chunk of your Social Security to taxation, paying higher Medicare premiums, or inadvertently shrinking the inheritance you planned to leave your children or grandchildren.
This guide is designed to give every Orlando and Central Florida retiree a complete, clear understanding of how RMDs work, what the rules are following recent legislation, what mistakes people commonly make, and most importantly, how smart planning in advance can transform RMDs from a tax burden into a manageable, strategic part of your retirement income plan.
What Is a Required Minimum Distribution?
A Required Minimum Distribution is the minimum amount the IRS requires you to withdraw each year from certain tax deferred retirement accounts once you reach a specified age. These accounts include:
∙ Traditional IRAs
∙ SEP IRAs
∙ SIMPLE IRAs
∙ 401(k) plans
∙ 403(b) plans
∙ 457(b) governmental plans
∙ Profit sharing plans
∙ Other defined contribution plans
Roth IRAs are the notable exception. During the original owner’s lifetime, Roth IRAs are not subject to RMDs. This is one of the primary reasons Roth conversions have become such a powerful planning tool in recent years, a point we will return to shortly.
The RMD amount is calculated each year by dividing your account balance as of December 31 of the prior year by a life expectancy factor from IRS Uniform Lifetime Tables. The older you are, the smaller the divisor, meaning a larger percentage of your account must be withdrawn each year. In your early 70s, you might be required to withdraw roughly 3.6% to 4% of your balance. By your mid 80s, that percentage climbs to 6%, 7%, or higher.
The Silent Tax Bomb Hidden Inside Most 401(k)s
The SECURE Act and SECURE 2.0: What Changed and When
One of the most significant recent developments in retirement planning was the passage of the SECURE Act in 2019 and its follow up legislation, SECURE 2.0 in 2022. These laws made sweeping changes to RMD rules that every Orlando retiree needs to understand.
Before the SECURE Act: RMDs began at age 70½, a confusing half year threshold that caused constant confusion and errors.
After the SECURE Act in 2020: The RMD starting age was raised to 72 for anyone who had not yet reached 70½ by December 31, 2019.
After SECURE 2.0 beginning in 2023: The RMD starting age was raised again to 73 for anyone born between 1951 and 1959, and to 75 for anyone born in 1960 or later.
This is enormously significant for Central Florida retirees who are currently in their late 60s or early 70s. If you were born in 1960 or later, you now have until age 75 before you are legally required to begin RMDs. That is a planning window of several years that, if used wisely with Roth conversions and other strategies, can meaningfully reduce your lifetime tax burden.
Here is a quick reference:
∙ Born before 1951: RMDs already in progress under prior rules
∙ Born 1951 to 1959: RMD start age is 73
∙ Born 1960 or later: RMD start age is 75
If you are unsure which rule applies to you, that is exactly the kind of question a qualified Orlando retirement planning advisor can answer quickly and with precision.
How Your RMD Is Calculated
The IRS uses life expectancy factors published in its Uniform Lifetime Table, Table III, to calculate your annual RMD. The calculation is straightforward:
RMD = Prior Year End Account Balance ÷ IRS Life Expectancy Factor
For example, if you are 75 years old and your traditional IRA was worth $800,000 on December 31 of the previous year, the IRS life expectancy factor for a 75 year old is 24.6. Your RMD would be:
$800,000 ÷ 24.6 = $32,520
That $32,520 must be withdrawn from your IRA by December 31 of the current year and added to your taxable income. If you are also receiving Social Security, a pension, and investment income, you can see how RMDs can stack up quickly and push you into territory where more of your Social Security becomes taxable and Medicare surcharges begin to apply.
There is one important exception to the Uniform Lifetime Table. If your sole beneficiary is a spouse who is more than 10 years younger than you, you may use the Joint Life and Last Survivor Expectancy Table, Table II, which uses a larger divisor and results in a smaller required withdrawal each year. This is a frequently overlooked strategy for Orlando couples with a meaningful age gap.
The RMD Deadline: When Do You Have to Take It?
Your annual RMD must generally be taken by December 31 of each calendar year. There is one exception. In the year you first become subject to RMDs, you have until April 1 of the following year to take your first distribution.
This sounds like a gift and sometimes it is, but be careful. If you wait until April 1 of the following year to take your first RMD, you will then need to take a second RMD by December 31 of that same year. That means two RMDs in one year, which can temporarily spike your taxable income and have ripple effects on your Social Security taxation, Medicare premiums, and overall tax bracket.
For many retirees, it is smarter to take the first RMD in the year it first applies rather than deferring to April. However, this depends entirely on your income picture in both years. A retirement advisor can model both scenarios and help you choose the approach that minimizes your lifetime tax liability.
Read More about Managing 401(k) Taxes in 2026
RMDs and the Tax Consequences That Catch Orlando Retirees Off Guard
RMDs Are Fully Taxable as Ordinary Income
Unlike long term capital gains from a brokerage account, which may be taxed at 0%, 15%, or 20%, your RMD is taxed as ordinary income at the same rate as your wages. Depending on the size of your IRA and the size of your RMD, this could push you into the 22%, 24%, or even 32% federal tax bracket. While Florida has no state income tax, a genuine advantage for Orlando retirees, federal taxes on RMDs apply regardless of which state you live in.
The Social Security Tax Torpedo
This is one of the most painful and preventable tax problems in retirement. Up to 85% of your Social Security benefit can be subject to federal income tax, depending on your combined income, also called provisional income. That includes your adjusted gross income, plus any tax exempt interest, plus half of your Social Security benefit.
When RMDs hit, they increase your adjusted gross income. That increased AGI can trigger higher Social Security taxation thresholds. The result is a situation where every additional dollar of RMD income does not just cost you the marginal tax on that dollar. It also causes more of your Social Security to become taxable. For some retirees, this creates an effective marginal tax rate on certain income of 40% or higher, even if they are technically in the 22% or 24% bracket.
We have seen this play out repeatedly with clients in Windermere, Lake Nona, and the Winter Park area. Retirees with substantial IRAs were blindsided by the effective tax rate on their RMDs once Social Security was in the picture.
Medicare IRMAA Surcharges
Here is a cost that very few retirees anticipate. If your modified adjusted gross income (MAGI) exceeds certain thresholds, Medicare charges you higher premiums for Part B and Part D coverage. These charges are called Income Related Monthly Adjustment Amounts, or IRMAA.
In 2024, the standard Medicare Part B premium is $174.70 per month. If your income crosses the IRMAA thresholds, your premium can jump to $244.60, $349.40, $454.20, or as high as $559.00 per month for Part B and Part D coverage. For a married couple, that can easily amount to more than $13,000 per year in additional Medicare premiums triggered solely by RMD income pushing you over a threshold.
The especially challenging element is that Medicare uses your income from two years prior to set your current premium. That means an RMD that spikes your income in 2024 will affect your Medicare premiums in 2026. Planning ahead, ideally years in advance, is the only way to manage this effectively.
Real World RMD Mistakes Orlando Retirees Have Made
Mistake 1: Ignoring the Penalty — Robert, 74, Seminole County
Robert was a retired engineer from Seminole County who managed his own finances and had done a reasonably good job saving. He had a traditional IRA worth $620,000. When he turned 73, he knew RMDs were coming but kept putting off the paperwork thinking he would handle it next year.
He missed his first RMD entirely. The amount he should have withdrawn was approximately $24,000. The IRS penalty at the time was 50 percent of the missed distribution meaning Robert owed a $12,000 penalty on top of the taxes on the distribution he eventually took. Under SECURE 2.0, that penalty has been reduced to 25 percent and 10 percent if corrected quickly. Even at reduced rates, an avoidable $2,400 to $6,000 penalty is money no one should be giving to the IRS unnecessarily.
The lesson: RMDs are not optional and the penalties for missing them, even with the new reduced rates, are significant and completely avoidable with proper oversight. Set it up as an automatic distribution with your custodian or work with an advisor who tracks your deadlines.
Mistake 2: Taking All RMDs in December — The Pattersons, Celebration
Frank and Evelyn Patterson lived in the Celebration community and had always handled their own finances. They knew about RMDs and dutifully took them, always in December because they did not want to give the IRS their money a day earlier than required.
The problem was that December RMDs left them scrambling every year. In one particular year, Frank’s December RMD of $38,000 came on top of a required distribution Evelyn took from her inherited IRA and both landed in the same tax year alongside a year end dividend distribution from their brokerage account. The combination pushed them over an IRMAA threshold they had never crossed before and resulted in higher Medicare premiums two years later that cost them an additional $4,200 they had not planned for.
The lesson: The timing of your RMD within the calendar year matters. Taking distributions earlier in the year, or spreading them across the year, can give you better visibility into your total income picture and allow for adjustments before year end. It also allows time for a Qualified Charitable Distribution if your income is running high.
Mistake 3: Not Using the Qualified Charitable Distribution Strategy — Helen, 78, Winter Garden
Helen was a retired schoolteacher living in Winter Garden who had always been generous with her church and other local charities. Each year she would take her $22,000 RMD from her IRA, pay federal income tax on it, then write checks to her favorite charities and claim a deduction on her tax return.
What Helen did not know was that a Qualified Charitable Distribution, sometimes called a charitable IRA rollover, would allow her to transfer up to $105,000 per year directly from her IRA to a qualifying charity. A QCD satisfies your RMD without the distribution appearing on your tax return as income.
By not using this strategy, Helen paid taxes on income she was immediately giving away anyway. Over five years her failure to use QCDs cost her approximately $27,500 in unnecessary taxes. Her charitable intent was wonderful, but her tax strategy was working against her.
The lesson: If you are charitably inclined and subject to RMDs, a Qualified Charitable Distribution is one of the most powerful and underutilized tools in the tax code. It reduces your taxable income, keeps your Social Security taxation lower, helps avoid IRMAA thresholds, and may allow you to contribute more to charity than you could have afforded after taxes.
Mistake 4: Leaving Large IRAs to Children Without Planning — The Garcias, East Orlando
Miguel and Carmen Garcia had done many things right. They had saved diligently, lived modestly, and accumulated a combined IRA balance of $1.4 million by the time Miguel passed away at 79. Carmen inherited the IRA, rolled it into her own, and continued to take RMDs.
When Carmen passed away at 84, the IRA, now worth $1.1 million, passed to their two adult children, ages 56 and 58, as beneficiaries.
Under the SECURE Act’s 10 year rule, non spouse beneficiaries who inherit IRAs must fully distribute the account within 10 years of the original owner’s death. There are no required annual distributions in years one through nine. The entire account must be emptied by the end of year ten. For the Garcia children, both still working at good salaries, adding $550,000 each of IRA distributions to their already substantial income over the next ten years created an enormous tax problem. In their peak income years, much of the inherited IRA was taxed at the 32 percent or 35 percent bracket.
The estimated additional federal income tax compared to an optimized strategy was over $190,000, taxes that could have been dramatically reduced had Miguel and Carmen done Roth conversions during the years when their income was lower and their tax bracket allowed it.
The lesson: Your RMD strategy is not just about your own retirement. It has direct implications for your heirs and the tax efficiency of your legacy. Planning for the 10 year rule, particularly through Roth conversions, is one of the most important gifts you can give your children.
Smart RMD Planning Strategies for Central Florida Retirees
- Roth Conversions During Your Window Years The period between retirement and age 73, or age 75 depending on your birth year, is often the most valuable tax planning window of your life. Your income may be lower, your Social Security may not yet be turned on, and your RMDs have not begun. This is the time to strategically convert portions of your traditional IRA to a Roth IRA. You pay taxes now at lower rates, eliminate future taxes on that money, and reduce future RMDs. A Roth conversion strategy requires careful calibration. You do not want to convert so much that you push yourself into a high bracket or trigger IRMAA. A qualified retirement planning advisor can model the exact conversion amounts that optimize your lifetime tax picture.
- Qualified Charitable Distributions (QCDs) As described in Helen’s story above, if you are 70½ or older and charitably inclined, a QCD allows you to direct up to $105,000 per year from your IRA to qualifying charities tax free. This strategy is especially valuable for Orlando retirees who tithe regularly, support local nonprofits, or give to their church or synagogue. A QCD satisfies your RMD obligation while keeping that income off your tax return entirely.
- Aggregation Rules — Simplifying Multiple Accounts If you have multiple traditional IRAs, you must calculate an RMD for each account separately. However, you can withdraw the total combined RMD from any one or combination of those IRAs. This flexibility allows you to strategically manage which accounts you draw from based on investment performance, account positioning, or consolidation goals. Note that 401(k) and 403(b) accounts do not enjoy this same aggregation flexibility. RMDs from each employer plan must generally be taken from that specific plan.
- Still Working Exception If you are still working at age 73 or beyond and participating in your current employer’s 401(k) plan, you may be able to delay RMDs from that specific plan until you actually retire, provided you do not own more than 5 percent of the company. This exception does not apply to IRAs or 401(k) plans from former employers. For actively retired Orlando residents who continue part time work, this can provide meaningful additional deferral time.
- Consider Your Beneficiary Designations Your IRA beneficiary designation is one of the most important documents you will ever sign. It is also one of the most commonly neglected. Naming a spouse as primary beneficiary provides the most flexibility. Naming adult children as beneficiaries triggers the 10 year rule. Naming a trust as beneficiary requires careful drafting to avoid compressing distributions into an even shorter period. Reviewing and updating your beneficiary designations, particularly after major life events like divorce, the death of a spouse, or the birth of grandchildren, is something we recommend doing annually.
Integrating RMD Planning With Your Full Orlando Retirement Strategy
RMDs do not exist in isolation. They are one of many moving parts in your retirement income plan, and they interact with every other element of your financial picture. At our Central Florida practice, we integrate RMD planning with:
• Social Security timing. The year you turn on Social Security combined with the year your RMDs begin can create income stacking that dramatically affects your tax picture. Coordinating these two events, ideally starting Social Security before large RMDs hit, or after, is a key element of retirement income optimization.
• Medicare enrollment and IRMAA management. We project your income two years forward at all times to anticipate Medicare premium impacts from RMDs and plan accordingly.
• Estate planning coordination. Your attorney, CPA, and financial advisor should all be aligned on how your IRA assets fit into your overall estate plan given the post SECURE Act environment for inherited IRAs.
Frequently Asked Questions About RMDs for Orlando Retirees
Do I owe Florida state income tax on my RMD?
No. Florida has no state income tax, which is one of the genuine advantages of retiring in the Sunshine State. However, your RMD is still subject to federal income tax as ordinary income.
Can I reinvest my RMD?
Yes. Once you have taken the required distribution and paid the taxes, you are free to reinvest the remaining funds in a taxable brokerage account, savings account, or anywhere else you choose. The money is yours to deploy as you see fit.
What if I do not need the money from my RMD?
This is where QCDs and Roth conversions become powerful tools. A QCD allows you to direct the money to charity without it appearing as income. Alternatively, if you are making proactive conversions before your RMD age, you can reduce the future RMD amount by shrinking the traditional IRA balance over time.
Can I take more than my RMD?
Absolutely. The RMD is a minimum, not a maximum. You can always take more, though additional withdrawals are also taxable as ordinary income.
What happens if my spouse inherits my IRA?
A surviving spouse has the most flexibility of any beneficiary. They can roll the inherited IRA into their own IRA, delay RMDs to their own applicable starting age, and use the Uniform Lifetime Table, effectively treating the inherited IRA as their own.
The Bottom Line: RMDs Are Manageable With a Plan
For Orlando retirees with significant traditional IRA or 401(k) balances, Required Minimum Distributions are one of the most consequential tax events in retirement. Left unmanaged, they can push you into higher tax brackets, trigger Social Security taxation, lead to higher Medicare premiums, and reduce the legacy you leave to your family by hundreds of thousands of dollars.
Here is the key truth: RMDs are entirely manageable with proper planning. The retirees who face the biggest problems are those who wait until their RMDs begin to start thinking about strategy. The retirees who come out ahead are the ones who start planning five to ten years in advance, using the window between retirement and their RMD start date to make Roth conversions, optimize their Social Security timing, and coordinate their income streams to minimize lifetime taxes.
If you are a Central Florida retiree or approaching retirement and you have questions about how RMDs will affect your income, your taxes, and your family’s financial future, we encourage you to schedule a complimentary RMD and Retirement Income Review with our Orlando based team. We will analyze your specific situation, model your projected RMDs over time, and build a strategy designed to keep more of your money in your hands instead of the IRS’s.
Your retirement savings took a lifetime to build. Make sure your distribution strategy is as carefully designed as your accumulation strategy was.
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Fictitious names were used in this article. This article is intended for educational purposes and does not constitute specific financial, tax, or legal advice. Tax laws and IRS regulations are subject to change. We recommend consulting with a qualified retirement planning professional and CPA before making decisions regarding Required Minimum Distributions and to consult with an attorney for legal advice.The information and opinions contained in any of the material requested from this website are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. They are given for informational purposes only and are not a solicitation to buy or sell any of the products mentioned. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.
