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Single Women & RMDs: Lisa’s Costly Mistake at 73

  • Vincent Grosso
  • Sep 16
  • 2 min read

Hey everyone, today we're going to talk about RMDs and what you can do to help your future self before you reach your RMD age. We'll walk through a case study of Lisa, a 72-year-old single woman about to take her first RMD next year.


Lisa’s Situation


Lisa is 72 and has a Traditional IRA of $2.2 million. Her RMD age is 73. If you’re unfamiliar, RMD stands for Required Minimum Distribution. This is the amount the government requires you to withdraw from your Traditional IRA each year.


Lisa has no debt, is retired, and draws Social Security of about $4,600 per month. Her monthly expenses are around $8,000. Lisa is concerned about high taxes and Medicare IRMA surcharges triggered by large RMDs.


The problem: Lisa didn’t plan for these RMDs. While she doesn’t need this money to cover her expenses (she has a brokerage account), she will be required to take it out, increasing her taxable income and Medicare premiums.


Income Before RMDs


Before her RMDs begin, Lisa’s income is $110,000. Her tax bracket is relatively low, and she isn’t subject to IRMA surcharges. To fund her lifestyle, she draws from her brokerage account.


What Happens at RMD Age


At 73, Lisa’s first RMD causes her income to jump to approximately $179,000, including $85,000 in required withdrawals. Her tax bracket rises significantly, and she becomes subject to IRMA surcharges.


As her Traditional IRA grows, her required withdrawals increase over time, further increasing her taxes and Medicare premiums.


How to Reduce RMD Impact


There are a few strategies Lisa (and you) can consider to reduce the tax and IRMA burden:


  1. Roth Contributions: Contribute directly to a Roth IRA instead of a Traditional IRA if income limits allow.

  2. Backdoor Roth Contributions: Contribute to a Traditional IRA without a tax deduction, then move it to a Roth IRA. Moving existing Traditional IRA balances to a 401(k) can help avoid pro-rata rules.

  3. Roth Conversions: Convert portions of a Traditional IRA into a Roth to lower future RMDs and IRMA surcharges.

  4. Delay Social Security: Delaying Social Security can increase future benefits and allow Roth conversions to occur at lower tax rates.


By applying these strategies, Lisa could reduce her taxable income from $179,000 to $151,000 and her IRMA surcharge from $4,400 to $1,100 in key years.


Key Takeaways


  • Don’t wait until RMD age to plan – RMDs affect your taxes, Medicare premiums, and overall financial flexibility.

  • A Roth IRA gives you more control over your income sources and reduces forced withdrawals.

  • Planning ahead allows your future self to minimize taxes, maximize flexibility, and maintain your lifestyle.

 
 
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