“Starting in my 70s, my RMDs are going to be very high: probably $100,000 or more.” (Photo subject is model.) – MarketWatch Photo Illustration/iStockphoto
My annual expenses are roughly what they are now, about $60,000.
Currently, I have substantial retirement savings between a Roth IRA, a traditional IRA, and a Thrift Savings Plan (TSP). I think this will be enough for me to live to be 100 years old. I am 65 years old, single, and currently have $1.6 million in my retirement account.
My IRA contributions have been maxed out since 1992, and my TSP contributions have been maxed out since 2019. I will be maxing out my Roth IRA contributions in 2026, but am considering cutting my TSP contributions slightly and putting the difference into my taxable investments.
Starting in my late 70s, my RMDs will look very high…$100,000 or more.
When does it make sense to slow down your retirement savings?
serious saver
look: Should I collect Social Security at age 62 so I can travel and take care of my dad?
First, it’s awesome that you’ve saved so much for retirement over the past 30-plus years. It’s an amazing feat that your older self will surely appreciate.
First thing I want to say is that you look like you’re in great shape. If you stopped saving for retirement entirely and your account never grew more than $1.6 million, and you followed the general 4% rule by taking an initial 4% distribution from your account and adjusting for inflation in subsequent years, you could withdraw $64,000 per year. This is consistent with your expected living expenses and does not include Social Security. That alone tells me that you are definitely on the right path, and what you do in the future will only make it better.
A few key points: How you invest is just as important as how you invest a lot of You invest because investing is too risky as you approach retirement age and your hard-earned money is more susceptible to market downturns, but if you’re too conservative, your asset growth won’t keep pace with inflation. So when you analyze your contributions, be sure to examine how you invest and make sure your asset allocation meets your financial goals, needs and timelines.
Make sure you account for all possible expenses in your annual spending estimate—not just the mortgage or monthly bills like rent, utilities, and groceries, but also the discretionary spending that will make retirement fun and the extra savings you’ll want in case of an emergency. To be on the safe side, you can increase your annual expense estimate, especially if you plan to continue saving (only in vehicles other than retirement accounts).
Let’s take a moment to discuss the Required Minimum Distribution (RMD). They can be a headache when they begin, which is why many people try to avoid them as much as possible. One way is to use Roth transformation. Keep in mind that Roth conversions currently trigger tax consequences, but if you plan accordingly, conversions may lower the amount you can withdraw from traditional retirement accounts in the future.
There’s no simple number that tells you how to switch – it depends a lot on your circumstances – but advisers will usually advise you to switch as much as possible within your current tax bracket rather than moving to a higher tax bracket. By doing this, you’ll pay taxes on the amount transferred from the traditional account to the Roth account (and you’ll pay ordinary tax rates on that conversion), but if you follow the distribution rules, you won’t have to pay taxes on future withdrawals from the Roth account. Unlike traditional retirement accounts, Roth accounts are also not subject to RMD rules.
Of course, there are some caveats. For example, if your income is high in one year but you expect your income to be lower in the future, you may want to delay the conversion. Since you’ve also reached Medicare age, which is 65, you should pay attention to how high your income is, as a Roth conversion may trigger an income-related monthly adjustment amount in your Medicare Part B or Part D premiums (essentially as a surcharge for higher earners) in future years. The income-related monthly adjustment amount (IRMAA) is based on modified adjusted gross income from two years ago (so if you exceed the income limit in 2025, it will affect your Medicare Part B or Part D premiums in 2027).
Beyond that, another option you mentioned is to reduce your contributions to retirement accounts to avoid higher RMDs. Glad to hear you’re still committed to saving – just in a different way. There’s nothing wrong with asset diversification, which includes consolidating and supporting taxable investment accounts. As you know, these accounts have their own tax implications, but they are not tied to RMDs like many retirement accounts.
If you’re okay with that, and you’ve worked hard to structure your investment accounts so the money works for you and your financial goals, why not shake things up a bit? You may find that in addition to investing, you want to try a variety of savings strategies, such as laddering, an appropriate annuity or a high-yield savings account to suit your retirement income needs – especially emergency savings.
The most important thing is to understand your retirement income plan. If you want to lower your RMD by converting some of the funds to a Roth, you might choose to withdraw the required funds from a traditional account and then withdraw the remainder from a Roth, which would result in a lower tax bill. Or, maybe your tax bracket will be lower than you expected for a year so that your RMDs aren’t affected as much – and then you can keep the rest of your retirement needs separate from taxable investment accounts and/or high-yield savings accounts. There are other ways to satisfy your RMD, such as making donations through qualified charitable distributions.
If your plan is not to stop saving, but just to save in a different form, then in the long run the money will still be yours—just like it would be in a retirement account. The only thing is real What has changed is that you have more choices about how and when to use your money.
