Will RMDs Ruin the 4% Rule for You?
Don't let required minimum distributions (RMDs) rain on your retirement parade.


Will RMDs ruin the 4% rule for you in retirement? It's quite possible if you have a good chunk of your retirement savings in traditional accounts. To some degree, building that retirement nest egg is easy. You set aside money each month to go into your IRA or 401(k), invest it in an S&P 500 index fund or collection of stocks, and wait for it to compound.
It’s managing your savings in retirement that’s the tricky part.
Once you’ve accumulated wealth, you don’t want to risk having your nest egg dry up. A recent Allianz survey found that 64% of respondents worry more about running out of money than actually dying, which speaks to the importance of withdrawing from your savings carefully.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
To that end, there’s some guidance in the form of the 4% rule.
The 4% rule goes as follows: Withdraw 4% of your savings in your first year of retirement. Repeat that 4% withdrawal in future years while making adjustments for annual inflation. Do this consistently, and your savings are likely to last 30 years.
Of course, not everyone agrees with the 4% rule. In 2024, Morningstar recommended a 3.7% withdrawal rate for retirees due to stock market valuations and bond yields at the time. (That said, Morningstar stuck with 4% in 2023, when bond yields were slightly more favorable.)
Nonetheless, many financial professionals think 4% is a safe withdrawal rate, for the most part. And you may be inclined to stick with it for your retirement. But will required minimum distributions (RMDs) get in your way?
When RMDs ruin the 4% rule
The IRS offers traditional IRA and 401(k) savers some pretty great perks — tax-free contributions and tax-deferred growth. In exchange, the IRS wants IRAs and 401(k)s to be used for their intended purpose, and not as a loophole for wealthy people to pass money on to future generations in a tax-advantaged manner.
For this reason, the IRS forces savers born between 1951 and 1959 to take Required Minimum Distributions (RMDs) from these accounts starting at age 73. For those born in 1960 or later, RMDs start at 75.
Your RMD calculation changes every year based on the fair market value of your retirement account that’s subject to those withdrawals and your life expectancy. For this reason, as people age, their RMDs can increase. But that could make it difficult to stick to the 4% rule.
If you have a large IRA or 401(k) that’s subject to RMDs, as you get older, you may find that your mandatory withdrawal amount is greater than 4% of your total nest egg.
Remember, RMDs may not apply to every account you’re holding in retirement. But if a 4% withdrawal rate applied to all of your accounts results in $38,000 and your RMD amount is $45,000, you’re effectively being forced to withdraw from your savings at a higher rate.
Working around RMDs
While it’s clear that RMDs could make it difficult to stick to a 4% withdrawal rate, there are workarounds.
Reinvest rather than spend.
As Drew Boyer, CFP and Founder at Boyer Financial Group explains, if your RMD is greater than 4% of your total assets, the solution is simply not to spend it all.
“If your RMD is higher than 4%, it’s the IRS’s distribution calculator you must follow. But your spending patterns don’t need to change,” he says. “If you are forced to take out 6%, you don’t need to spend 6%. You can still spend 4% but reinvest the excess amount.”
One caveat is that you can’t put an RMD back into a tax-advantaged account. But a taxable brokerage account is fair game, Boyer says. I-bonds could be an appropriate investment for you, too, depending on your risk tolerance and what interest rates look like.
And there’s no rule stating you have to invest RMD funds you don’t want or need to spend. You can put the money into a savings account or CD if there’s no specific investment that aligns with your goals. Either way, you’re preserving the cash rather than spending it.
Avoid RMDs with Roth conversions.
Another option? Get ahead of RMS by doing a Roth conversion.
James Hutchens, National Practice Lead for Wealth Advisory at Northern Trust, says, “Big RMDs can be planned for. A Roth conversion is a potential workaround if your planning horizon is long enough and you use other assets to pay the income tax bill associated with the conversion. This reduces the amount that is subject to RMDs.”
That said, Hutchens warns that Roth conversions need to be timed carefully. Not only do they increase your taxable income the year you make them, but they can have other impacts.
As Hutchens points out, having a large income in any given year could result in Medicare surcharges known as income-related monthly adjustment amounts (IRMAA) two years later.
That’s why “a conversion should be considered after careful consideration of income flows, goals, and your planning horizon,” Hutchens insists.
Handle large RMDs with a qualified charitable distribution.
Finally, Boyer says, you can consider a qualified charitable distribution if you end up with an RMD that well exceeds the 4% mark. This won't help you lower your withdrawal rate, but it could help you avoid a big tax bill.
"It satisfies your mandatory RMD and helps pay it forward for those in need," says Boyer. "That’s a win-win move that’s tax-smart."
Read More
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Maurie Backman is a freelance contributor to Kiplinger. She has over a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. She has written for USA Today, U.S. News & World Report, and Bankrate. She studied creative writing and finance at Binghamton University and merged the two disciplines to help empower consumers to make smart financial planning decisions.
-
Why You May Want a Postnup
Even after you've said "I do," you can draw up an agreement to protect your assets.
-
Watch Out for Annuity Surrender Charges: How to Avoid Them
Pulling money out of an annuity early can be a costly proposition. Here's how surrender charges work and one potential way around them — an annuity "ladder."
-
Watch Out for Annuity Surrender Charges: How to Avoid Them
Pulling money out of an annuity early can be a costly proposition. Here's how surrender charges work and one potential way around them — an annuity "ladder."
-
The Snake Bite Effect: How Fear Can Cost Investors Dearly
Does market volatility make you feel like running scared? That could be a costly mistake. Here's why ... and what to do instead.
-
How the One Big Beautiful Bill Act Could Reshape 529 Plans
Trump's budget-reconciliation package could change 529 plan rules as early as this summer. What does that mean for you?
-
Superager Secrets: Keep Your Mind Sharp Past Age 80
Learn how superagers defy cognitive aging. Who knows? You might become one too.
-
I'm a Wealth Manager: This Is How to Reduce One of the Biggest Risks to Your Retirement
If the stock market dips when you retire, your portfolio may not have time to recover. But having a structured income plan for your retirement years can help.
-
Ditch the Fear: A Guide to Embracing Retirement Preparedness
Don't be scared about running out of money, be prepared. This financial professional explains how you can help take control of three critical retirement risk factors with a little planning.
-
Retire in Japan: It Ain’t Easy, Unless You’re Special
People find relocating to Japan worth the effort, as long as you can jump through those administrative hoops and be open to a flexible view of “retirement.”
-
Four Innovations That Reinvented Retirement as We Know It and Why AI Is Next
A financial professional explores the innovations that have reshaped our lives over the years — and what the next revolution, AI, could mean for your legacy.