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
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.
-
How Grandparents Can Help with Education Expenses
Before paying for your grandkids' education, it's important to consider how to help them without risking your own retirement. Here are 10 things to think about.
-
How to Plan for Aging in Place: Five Key Factors
Almost no one wants to live in a nursing home. But staying in your home as you grow older can be complicated, according to these experts.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock Basket
Limit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?
The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
-
Should You Claim Social Security Early or Late? A Financial Adviser Weighs In
There isn't a wrong age to start claiming Social Security, but there are factors that everyone should consider to avoid leaving money on the table.
-
Three Things Financially Confident People Do, From a Pro Who Knows
If you have any worries about your retirement future, take back control with these three tips.
-
Retire in This Island Country for That 'Permanent Vacation' Feeling
This English-speaking island nation offers a luxury retirement at a bargain price.
-
How Much Do I Need to Retire? A Financial Professional Breaks Down Your Options
What it all boils down to is will you be comfortable in retirement? Some people may rely on formulas, while others just aim for $1 million nest egg.
-
Test Out Your Retirement Before You Call It Quits
It's not easy to take a retirement back. Before you make the plunge, test the waters with these tips.
-
When You Need Capital Quickly, Think 'Ready, Set, Fund': A Financial Adviser's Strategy
Investors must be able to free up cash to meet short-term needs from time to time. This strategy will help you access capital without derailing your long-term goals.