The IRS Never Stops Demanding Withdrawals From a 401(k). Here's How Retirees Are Getting Ahead of It.

At 75, the IRS will tell a retiree born in 1960 or later exactly how much they must pull from their traditional 401(k) — and it will keep telling them, every year, for the rest of their life. There is no age at which required minimum distributions end. A 95-year-old with a balance still calculates and withdraws one annually. That reality is driving a growing number of affluent investors in their 60s to act now, before the government sets the withdrawal schedule for them.

The mechanics are straightforward. Under the SECURE 2.0 Act, RMDs from traditional IRAs and 401(k)s begin at age 73 for anyone born between 1951 and 1959, and at age 75 for those born in 1960 or later. Each year's required withdrawal is calculated by dividing the prior December 31 account balance by an IRS divisor from the Uniform Lifetime Table — a number that shrinks with age, forcing a larger percentage out every year. At 75, the divisor is 24.6, meaning a $900,000 balance would require a withdrawal of roughly $36,585. By 85, the divisor falls to about 15.9, pulling out more than 6% of whatever remains.

The share of the balance that must come out rises steadily: about 3.8% at age 73, about 5.0% at 80, and more than 15% at 100, according to IRS Publication 590-B figures cited by figuremoney.com and calcwisp.com. The obligation ends only when the account reaches zero, or the owner dies — at which point it typically transfers to beneficiaries, most of whom must empty an inherited account within 10 years under the SECURE Act.

That inherited-account clock is central to why some retirees are rethinking which pot of money they spend first. Consider a hypothetical married 64-year-old, born in 1962, with $950,000 in a traditional 401(k) and $250,000 in Roth savings. His RMDs don't begin until 75 — more than a decade away. His two children both earn high salaries. The instinct might be to preserve the pretax account and leave the Roth, which carries no lifetime RMDs for the original owner, to the kids. But 247wallst.com lays out why the math often runs the other way.

The account you plan to leave your kids could quietly hand the IRS a larger cut than if you spent it yourself, and the math behind why surprises most people who think they have already figured out their withdrawal order.— 247wallst.com

Traditional 401(k) withdrawals are taxed as ordinary income. A $250,000 distribution taxed at 24% leaves $190,000. The same amount from a qualified Roth account comes out whole. Now hand that traditional money to a child in the middle of a peak-earning career: stacked on top of a large salary, it could be taxed at 32%, costing $80,000 on that same $250,000, according to 247wallst.com. The Roth, by contrast, has no required withdrawals while the owner is alive and can keep growing untouched.

For a married couple in 2026, the 22% bracket runs up to $211,400 of taxable income, and the standard deduction is $32,200 — together allowing about $243,600 of gross income before any dollar is taxed at 24%, according to 247wallst.com. Each pretax dollar withdrawn now at 22% is a dollar heirs will never face at 32%. That gap is the engine behind the strategy.

The window between retirement and the first required distribution — when income is often at its lowest — is widely cited as the optimal time for this kind of planning. In those years, there are no Social Security benefits for extra withdrawals to make taxable, and bracket space may be at its widest.

Two costs complicate the math and set a practical ceiling on how aggressively anyone should draw down a pretax account. Medicare's IRMAA surcharge looks back two years, so income today sets premiums later. For a couple already on Medicare, the first IRMAA threshold sits at $218,000 of income — just $25,600 below the top of the 22% bracket. Crossing it adds roughly $2,297 a year in combined Part B and Part D surcharges per couple, according to 247wallst.com. Social Security adds a second pressure: once provisional income on a joint return passes $44,000, up to 85% of benefits become taxable, which can push the effective marginal rate on extra withdrawals to near 41% within that range.

Roth conversions work on the same logic. Moving money from a traditional IRA or 401(k) into a Roth triggers ordinary income tax on the converted amount in the year of conversion, but those dollars leave the pretax system permanently and face no future lifetime RMDs. Conversions are uncapped, cannot include an RMD itself, and must be completed by December 31. Because they raise taxable income, many investors spread them across lower-income years to stay below IRMAA thresholds and bracket ceilings, according to q3adv.com.

The strategy is not universal. Three situations reverse the preferred order, according to 247wallst.com: if heirs earn low incomes and would face a lower bracket than the retiree; if a charity is the beneficiary, since it pays no income tax on a traditional account; or if the retiree is already in the 32% bracket — in which case draining pretax money faster means paying tax early at a higher rate than heirs might face. Pulling extra pretax money beyond what is actually needed can also push income over the IRMAA line and cost more than it saves.

One additional exit from RMDs exists for those charitably inclined: a qualified charitable distribution, which allows money to go directly from an IRA to a qualified charity, satisfying the RMD without the amount counting as taxable income, according to q3adv.com. For retirees who give regularly, it can be a precise tool for managing taxable income in RMD years.

What none of these strategies change is the underlying rule: as long as a traditional IRA or 401(k) holds a balance and the owner is alive, the IRS requires a withdrawal every year. The SECURE 2.0 Act set the age RMDs begin — not an age they end. For the growing cohort born in 1960 or later, that clock starts at 75. The decade before it does is the planning window most financial advisers point to as the one that matters most.

Why it matters — For the millions of Americans with large pretax retirement balances, the gap between when RMDs begin and how heirs will be taxed on inherited accounts can determine whether a lifetime of saving is passed on efficiently or quietly eroded by avoidable taxes.

Reported by calcwisp.com, q3adv.com, figuremoney.com, 247wallst.com, schwab.com