A traditional IRA can be a reliable workhorse in retirement—steady, flexible, and tax-deferred. But small missteps can snowball into needless taxes, penalties, and Medicare surcharges. In this guide, you’ll learn the five most costly mistakes retirees make with traditional IRAs and how to sidestep them with clear, simple processes you can reuse every year. This article is written for near-retirees and retirees who are already drawing down (or about to start) and want practical, step-by-step direction.
This article is educational and not personalized tax, legal, or investment advice. For decisions about your situation, consult a qualified tax professional or fiduciary advisor.
Key takeaways
- Don’t miss or miscalculate RMDs. The first withdrawal timing, aggregation rules, and beneficiary nuances trip up many retirees—and penalties can apply.
- Plan withdrawals by tax bracket, not by habit. Sequencing IRA distributions affects Social Security taxation and Medicare IRMAA surcharges.
- Use qualified charitable distributions after age 70½. Direct gifts from IRAs can satisfy RMDs while keeping taxable income lower.
- Avoid rollover traps. Know the 60-day clock, the once-per-year IRA-to-IRA rollover limit, and when to insist on a direct trustee-to-trustee transfer.
- Keep beneficiary designations current. Inherited-IRA rules changed; overlooking them can force faster, tax-heavier withdrawals for heirs.
1) Missing, mis-timing, or miscalculating required minimum distributions (RMDs)
What it is & why it matters
Traditional IRA owners generally must begin minimum withdrawals the year they reach the current RMD age, with strict annual deadlines thereafter. Missing, mis-timing (e.g., delaying the first RMD and accidentally doubling up), or miscalculating can trigger steep excise taxes, interest, and amended returns.
Core purpose/benefit
- Keep your IRA withdrawals compliant and predictable.
- Prevent avoidable penalties and cash-flow shocks.
- Integrate RMDs into your tax plan instead of treating them as last-minute to-dos.
Requirements & low-cost tools
- Your prior December 31 IRA balances (from custodian statements).
- Access to a current RMD life-expectancy factor (Uniform Lifetime Table; different if your spouse is >10 years younger and sole beneficiary).
- A simple spreadsheet or your custodian’s RMD calculator (many offer one at no cost).
Step-by-step: set up your annual RMD rhythm
- Mark two dates on your calendar now.
- January 31: Expect the custodian’s annual RMD notice or offer to calculate it.
- December 31: Standard deadline to have the full year’s RMD distributed (except the first RMD can be delayed to April 1 of the following year—see caveat below).
- Decide on first-year timing.
- If this is your first RMD year, you may delay it to April 1 of next year, but that typically means two RMDs in the same calendar year (the delayed first plus that year’s regular RMD), which can elevate taxes and surcharges.
- Aggregate correctly.
- Calculate an RMD for each traditional/SEP/SIMPLE IRA you own, but you can take the combined total from any one or a mix of your IRAs.
- Do not mix IRA RMDs with 401(k) RMDs; those must be taken separately per plan.
- Calculate properly.
- Use the prior December 31 balance ÷ the applicable life-expectancy factor for your situation. Custodians can calculate or provide the factor; you can also reference current tables.
- Automate the cash flow.
- Set up monthly or quarterly RMD installments to reduce year-end scramble and sequence-of-returns risk on a single sell date.
Beginner modifications & progressions
- Beginner: Take your RMD as one December distribution while you get organized this first year.
- Intermediate: Switch to monthly RMD installments for smoother cash flow and withholding.
- Advanced: Pair RMD cash flow with a tax-bracket plan (see Mistake #2) and qualified charitable distributions (see Mistake #3).
Recommended frequency/metrics
- Review balances and RMD progress quarterly.
- Track: “RMD taken YTD,” “RMD remaining,” and “projected tax withholding.”
Safety, caveats & common mistakes
- Still working? That exception does not delay RMDs for IRAs; it may apply only to certain workplace plans and not to IRAs.
- Missed RMD? There’s a process to correct; do it quickly (see below).
- Inherited accounts follow different rules—don’t assume your old habits apply if you’re a beneficiary (Mistake #5).
Mini-plan example (first RMD year)
- In January, confirm your RMD amount with your custodian. 2) Choose either two payments (June/December) or monthly. 3) If considering a delay to April 1 next year, run a quick tax projection to see whether “two in one year” is worth it.
If you already missed or underpaid an RMD
- Take the shortfall immediately and follow the correction steps (including the required tax form). Timely correction can reduce the excise tax rate from 25% to 10% within a defined window.
2) Taking withdrawals in a tax-inefficient way (and triggering avoidable taxes & surcharges)
What it is & why it matters
Which dollar you pull when can determine how much of your Social Security is taxed and whether you pay Medicare IRMAA surcharges two years later. “Just take the cash when you need it” often leads to excess tax, especially in years with larger RMDs or capital gains.
Core purpose/benefit
- Keep lifetime taxes lower by filling low brackets and defusing bracket creep.
- Manage provisional income so you don’t unintentionally push up to 85% of Social Security benefits into taxable income.
- Reduce or avoid IRMAA surcharges on Medicare Part B/D premiums.
Requirements & low-cost tools
- A simple annual tax-projection worksheet that includes: taxable income, deductions, provisional income for Social Security, and estimated AGI/MAGI for IRMAA.
- Your Social Security benefits statement and Medicare premium information.
Step-by-step: smarter IRA withdrawal sequencing
- Start with your target bracket. Decide the top marginal bracket you aim to stay under this year. Fill income up to that ceiling with planned IRA distributions (on top of RMDs).
- Check Social Security taxation. Understand that up to 85% of benefits can be taxable depending on other income—coordinate IRA withdrawals accordingly.
- Mind IRMAA. Large one-time IRA withdrawals (or conversions) may increase future Part B/D premiums. If a life-changing event cuts income, you can file to request an adjustment.
- Spread income. Consider monthly or quarterly IRA withdrawals to avoid big spikes late in the year.
- Withholding: Elect appropriate federal withholding on distributions to minimize quarterly estimates—remember, you can opt out or choose a different rate for IRAs.
Beginner modifications & progressions
- Beginner: Take RMDs monthly and set a modest extra IRA withdrawal to top up your spending plan.
- Intermediate: Each fall, run a quick projection to decide whether to pull a little more (still under your target bracket) or to stop for the year.
- Advanced: Coordinate with capital-gains harvesting, charitable giving, and partial Roth conversions in non-RMD months (remember: you cannot convert the RMD itself).
Recommended frequency/metrics
- Revisit your tax projection mid-year and again in November.
- Track: “Provisional income estimate,” “AGI/MAGI for IRMAA,” and “withholding vs. expected tax.”
Safety, caveats & common mistakes
- Roth conversions: In a year you owe an RMD, you must satisfy the RMD first; the RMD cannot be rolled to another tax-deferred account or converted.
- Two RMDs in one year: Delaying the first RMD to April 1 can inflate AGI and MAGI for IRMAA—model it first.
Mini-plan example (one-page tax map)
- In June, estimate your year-end AGI including RMDs. 2) Compare to your bracket ceiling and IRMAA tiers; adjust the second-half withdrawals. 3) Lock withholding rates by November so you don’t owe underpayment penalties.
3) Ignoring qualified charitable distributions (QCDs) after age 70½
What it is & why it matters
Once you’re age 70½, you can send money directly from your IRA to an eligible charity and exclude that distribution from taxable income. For those who give charitably, QCDs can satisfy all or part of your RMD without raising AGI, which can help with both Social Security taxation and IRMAA.
Core purpose/benefit
- Give to causes you care about tax-efficiently.
- Satisfy RMDs while keeping AGI lower than if you took the distribution and then claimed a deduction.
Requirements & low-cost tools
- You must be 70½ or older on the date of the distribution.
- Gift must be paid directly from the IRA custodian to an eligible charity (not to donor-advised funds or private foundations).
- Know the annual QCD limit, which is indexed each year.
Step-by-step: make QCDs part of your RMD plan
- Confirm eligibility and the charity. Verify your age and that the organization is eligible to receive QCDs.
- Initiate a direct transfer. Ask your IRA custodian for a QCD form/checkbook; ensure the payee is the charity, not you.
- Track totals against the year’s cap. For 2025, the QCD limit is $108,000 per person; for a couple with two IRAs, each spouse can make QCDs up to their own limit. A separate, one-time QCD of up to $54,000 is allowed to certain split-interest entities.
- Coordinate with RMDs. Tell the custodian to code the distribution as a QCD so it counts toward your RMD.
- Retain documentation. Keep the charity acknowledgment and the 1099-R; your tax preparer will record the QCD correctly on the return.
Beginner modifications & progressions
- Beginner: Start with one QCD to your primary charity in Q4 so it cleanly offsets your remaining RMD.
- Intermediate: Schedule quarterly QCDs aligned with your giving calendar.
- Advanced: Pair annual QCDs with a charitable mini-plan (e.g., multi-year pledges) and evaluate the optional one-time split-interest gift if appropriate.
Recommended frequency/metrics
- Review QCD totals by December 10 to ensure year-end processing.
- Track: “QCD year-to-date,” “RMD remaining,” and “AGI impact.”
Safety, caveats & common mistakes
- QCDs must be direct; cashing out to yourself and then giving to charity won’t qualify.
- QCD amounts cannot also be claimed as itemized charitable deductions.
- If you made post-70½ deductible IRA contributions, the portion of your QCD that can be excluded may be reduced—coordinate with your tax pro.
Mini-plan example (annual giving)
- In September, list the charities and gift amounts. 2) Submit QCD forms to your custodian by early December. 3) Verify checks clear before December 31 so they count this year.
4) Botching rollovers, transfers, and conversions (and paying tax you didn’t owe)
What it is & why it matters
The mechanics of moving money can be deceptively tricky. The big pitfalls are the 60-day rule, the once-per-year IRA-to-IRA rollover limit, and withholding traps. A single mistake can turn a tax-deferred transfer into a taxable distribution, plus penalties if you’re under 59½.
Core purpose/benefit
- Keep your IRA money tax-deferred when it should stay tax-deferred.
- Avoid preventable penalties and re-deposit scrambles.
Requirements & low-cost tools
- Know the difference between a direct trustee-to-trustee transfer and an indirect rollover paid to you.
- Calendar reminders for the 60-day window if you ever receive funds personally.
- A standing instruction at your custodian to default to direct transfers.
Step-by-step: move money the safe way
- Default to direct transfers. When moving IRA money, choose trustee-to-trustee so it’s not paid to you; this avoids the 60-day clock and the once-per-year IRA rollover limit.
- Know the once-per-year rule. If you do an IRA-to-IRA rollover paid to you, you generally can’t do another from any of your IRAs for 12 months—aggregate, not per account.
- Mind withholding traps.
- IRAs: Distributions paid to you are subject to 10% withholding unless you opt out or choose a different rate.
- Employer plans (e.g., 401(k)): Eligible rollover distributions paid to you are subject to mandatory 20% withholding—even if you intend to roll the money back within 60 days. To avoid it, do a direct rollover.
- Missed the 60-day window? There are waiver pathways if the delay was beyond your control—review the official waiver process.
- RMDs cannot be rolled over or converted. In an RMD year, take the RMD first; you can’t convert or roll it to defer tax.
Beginner modifications & progressions
- Beginner: Put a note in your file: “Only direct transfers.”
- Intermediate: If you must do a 60-day rollover, set two reminders (day 30 and day 50) and confirm the deposit.
- Advanced: Coordinate partial Roth conversions outside of RMD distributions and after confirming the tax impact.
Recommended frequency/metrics
- Track the date and type of every movement: “transfer,” “indirect rollover,” “conversion.”
- Keep a simple rollover log so you don’t violate the 12-month rule.
Safety, caveats & common mistakes
- Don’t assume a check made out to you “for the benefit of” is a direct rollover—verify the payee is the receiving trustee/plan.
- If a plan distribution is paid to you with 20% withheld, you must replace the withheld amount from other funds within 60 days to avoid partial taxation.
Mini-plan example (consolidating two IRAs)
- Call the receiving custodian and request a trustee-to-trustee transfer. 2) Provide the latest statement and account number. 3) Confirm arrival and update your beneficiary list (see Mistake #5).
5) Neglecting beneficiary designations and the new(er) inherited-IRA rules
What it is & why it matters
Beneficiary forms—not your will—govern who inherits your IRA and how fast they must withdraw it. Rules for non-spouse beneficiaries changed in recent years, and many heirs must now empty inherited accounts within 10 years. An out-of-date form can trigger faster withdrawals, higher taxes, and family friction.
Core purpose/benefit
- Ensure your intended people receive your IRA efficiently and tax-sensibly.
- Avoid leaving heirs with forced, accelerated withdrawals they weren’t expecting.
Requirements & low-cost tools
- Current beneficiary designations on file at every custodian (primary and contingent).
- A simple estate snapshot: who, how much, and whether any trusts are named.
Step-by-step: tighten up your beneficiary plan
- Update forms today. Request and complete beneficiary forms for each IRA, ensuring names, percentages, and contingents are correct.
- Understand the timelines. For many non-spouse beneficiaries of owners who died after 2019, the account must be emptied by December 31 of the 10th year following the year of death (with special rules for certain eligible beneficiaries).
- Coach your heirs. If the original owner had begun RMDs, beneficiaries may have annual distribution obligations during years 1–9 before the 10-year deadline, depending on facts and final guidance; relief applied in earlier years but beneficiaries should verify current requirements.
- Spouse options are different. A surviving spouse often can treat the IRA as their own or use other timing options—this can materially change RMD timing and tax outcomes.
Beginner modifications & progressions
- Beginner: List all your IRAs and confirm every account has a beneficiary form.
- Intermediate: Add/refresh a contingent beneficiary and review after any life event.
- Advanced: If using a trust, have it reviewed for see-through provisions and updated to reflect post-2019 rules.
Recommended frequency/metrics
- Review beneficiaries annually and after marriages, divorces, births, deaths.
- Keep a one-page “IRA inheritance instructions” for heirs (custodian contact, account numbers, deadlines).
Safety, caveats & common mistakes
- Employer plans can impose stricter distribution rules than IRAs; a rollover to a properly titled inherited IRA may give heirs more flexibility.
- Don’t name your estate as beneficiary unless advised to; it can limit options and speed up distributions.
Mini-plan example (beneficiary refresh)
- Print beneficiary summaries for each IRA. 2) Confirm primary/contingent names and percentages. 3) Save copies with your estate documents and share the location with your executor.
Quick-start checklist (use this annually)
- Verify current RMD amount, method (monthly/quarterly), and deadline.
- Confirm aggregation: IRAs can be aggregated; workplace plans cannot.
- Decide on QCDs if age 70½+, including amount and charities; note the 2025 limit.
- Review tax projection: bracket ceiling, provisional income (Social Security), MAGI for IRMAA; set withholding on distributions.
- Confirm beneficiary designations for every IRA; print and file copies.
- If moving money, insist on direct trustee-to-trustee transfers.
Troubleshooting & common pitfalls
- “I missed my RMD.” Take the shortfall immediately and follow the official correction steps; timely correction can reduce the excise tax rate.
- “My plan mailed a check to me.” If it’s an eligible rollover distribution from a workplace plan, the plan likely withheld 20%. To keep the entire amount tax-deferred, you’ll need to deposit the gross amount within 60 days, replacing the withheld 20% from other funds. Better: ask for a direct rollover next time.
- “I converted to Roth but forgot my RMD.” You must take the RMD first; RMD amounts cannot be rolled over or converted.
- “I’m still working—can I skip my IRA RMD?” Not for IRAs; the “still-working” exception can apply to certain employer plans only.
How to measure progress (simple scorecard)
- Compliance: 100% of RMD taken by December 31 (or April 1 for the first RMD, if using the delay). IRS
- Taxes: Year-end estimate within ±5% of actual tax owed (withholding dialed in).
- Charitable: QCDs processed and cashed by year-end; receipts on file.
- IRMAA: No unintentional bracket jumps; if a life-changing event occurs, appeal filed.
- Estate readiness: All IRAs have up-to-date primary and contingent beneficiaries.
A simple 4-week starter plan (do this once; refresh annually)
Week 1 — Baseline & calendar
- Pull last December 31 statements and your current RMD notice. Enter each IRA’s balance into a simple sheet and calculate the year’s RMD (or confirm with custodian).
- Choose a distribution cadence (monthly/quarterly/one time) and set calendar reminders for payment dates and a December 10 “final check.”
Week 2 — Tax map & withholding
- Estimate your AGI, provisional income, and MAGI for IRMAA. Decide your target top bracket.
- Set distribution withholding on IRAs (or opt out if you prefer estimated taxes) and adjust any quarterly estimates accordingly.
Week 3 — Giving & QCDs (if 70½+)
- List charities and amounts. Submit QCD instructions to the custodian and note the 2025 limit and any one-time split-interest option if applicable.
Week 4 — Beneficiaries & movement
- Confirm beneficiary forms for every IRA (add contingents).
- If consolidating, request trustee-to-trustee transfers only—no checks to you.
FAQs
1) What happens if I miss my RMD deadline?
You may owe an excise tax on the shortfall. Taking corrective action within the defined window can reduce that rate. File the appropriate form and follow the steps to correct.
2) Can I take all my IRA RMDs from just one IRA?
Yes, you calculate an RMD for each IRA, but you can withdraw the total from one or multiple IRAs. This aggregation does not extend to 401(k)s—you must take those separately per plan.
3) Can I skip my IRA RMD if I’m still working?
No. The “still-working” exception does not apply to IRAs, though it can apply to certain employer plans depending on details.
4) What’s the 60-day rollover rule—and should I ever use it?
If a distribution is paid to you, you have 60 days to redeposit it to keep it tax-deferred. It’s easy to trip up, and employer plans will withhold 20% if the check is paid to you, so direct transfers/rollovers are usually safer. IRS
5) How do QCDs interact with RMDs?
A properly executed QCD (age 70½+, paid directly from your IRA to an eligible charity) can count toward your RMD while keeping AGI lower. There’s a 2025 annual limit per person.
6) Can I convert my RMD to a Roth IRA?
No. In an RMD year, you must take the RMD first. RMD amounts are not eligible to roll over or convert.
7) Are Social Security benefits taxable, and can IRA withdrawals affect that?
Yes—up to 85% of benefits may be taxable, depending on your other income. IRA withdrawals increase that income, so coordinate timing and amounts.
8) What is IRMAA and why should I care?
IRMAA is an income-related surcharge that can increase Medicare Part B and Part D premiums when your MAGI exceeds certain thresholds (based on a two-year look-back). Large IRA withdrawals can push you over a tier. There’s a process to request an adjustment after certain life events.
9) Do inherited traditional IRAs follow the same RMD rules I do?
No. Many non-spouse beneficiaries must empty inherited accounts by December 31 of the 10th year after the year of death, with exceptions for certain eligible beneficiaries. Additional timing details can apply, so heirs should review current rules.
10) How are RMDs calculated each year?
Divide the prior December 31 account balance by the appropriate life-expectancy factor from the applicable table for your situation. Custodians often calculate or offer to calculate it.
11) Can I take my RMD in monthly installments?
Yes. You can take your annual RMD in any number of payments as long as the total for the year is distributed by the deadline.
12) If I missed the 60-day rollover window, am I stuck?
Not necessarily. There are circumstances where the deadline may be waived; review the official waiver guidance to see if you qualify.
Conclusion
Managing a traditional IRA in retirement is less about chasing returns and more about controlling what you can control: timing, taxes, rules, and paperwork. Get those right and your portfolio has more room to do its job. Start with an annual RMD rhythm, layer in a simple tax map, consider QCDs if you give, move money only by direct transfer, and keep beneficiary forms current. That’s how you turn a good account into a great retirement tool.
One-line CTA: Pick one task from this guide—RMD calendar, QCD setup, or beneficiary refresh—and complete it before the end of this week.
References
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