A $500,000 IRA Forces an $18,900 Withdrawal at 73 Whether You Need the Money or Not. Here’s the Tax Math

A $500,000 IRA Forces an $18,900 Withdrawal at 73 Whether You Need the Money or Not. Here’s the Tax Math

David Beren

Tue, September 8, 2026 at 6:35 PM GMT+3 7 min read

Quick Read

• The IRS divides a $500,000 IRA balance by 26.5 at age 73, forcing an $18,900 withdrawal whether you need the income or not.

• That RMD stacks on Social Security and pension income, potentially triggering higher Medicare IRMAA premiums and making up to 85% of benefits taxable.

• A Qualified Charitable Distribution sends up to $108,000 directly to charity, satisfying your RMD while keeping that amount out of adjusted gross income.

• Many financial professionals are salespeople paid on what they push, not whether you end up wealthier. A fiduciary is the opposite. The SEC legally requires them to put your interests first. Advisor.com's free matching tool pairs you with vetted fiduciaries from major national firms, all in under three minutes. See who you match with today.

Let's assume that you did everything right for decades with your investments, all while saving consistently, investing patiently, and never touching them. Now, you have the IRS coming in and telling you how much of the money you have has to come out of your accounts every year. Required minimum distributions are pretty much exactly what they sound like in that the IRS sets a minimum amount of money you have to pull out of a traditional IRA every year once a retiree hits 73. If you have $500,000 in an account, the first RMD number is going to start at roughly $18,868.

Here is the thing, none of the normal reasons to leave money alone actually matters here, which is true whether you need the income or not. It also doesn't matter if the market is down and selling just feels wrong to you. The IRS is going to calculate what you owe based on your account balance and the life expectancy factor it calculates from its Uniform Lifetime Table, which is a withdrawal that has to happen by December 31st every year or you can face a penalty of up to 25% of the amount you should have taken out.

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How the Math Actually Works

The calculation here is actually pretty simple in that you can take your account balance as of December 31 of the prior year and divide it by the applicable factor for your age. At 73, that factor is 26.5, so the $500,000 headline number divided by 26.5 is what gives us the $18,868 number, or roughly $18,900.

When the calendar tells you you've hit 75 years of age, this "factor" shrinks to 24.6, which in turn means that the very same $500,00 balance now requires a withdrawal of around $20,325. Keep in mind that your account balance can continue to change, so your required withdrawal amount will generally increase as you get older, even if investment returns are modest.

There is one more timing wrinkle also worth knowing about in that your very first RMD can technically be delayed until April 1 of the year you turn 73. This sounds helpful, at least at first, until you realize what it means in that if you want, you are taking two RMDs in a single calendar year, the delayed first one and the regular second one.

Two big IRA withdrawals in a single year can mean a lot more taxable income, and it won't come as any surprise to learn that this could also mean pushing you right into the next highest tax bracket. Moreover, it's going to affect your Medicare premium as well as how much of your Social Security will end up being taxable.

The Tax Problem Nobody Plans For

Of course, there are times when RMD rules can get a little complicated. One such instance is that an RMD is taxed as ordinary income in the year you take it, which is a pretty straightforward thing most people should already know.

The problem actually stems from the idea that most retirees who are 73 years of age are also receiving Social Security benefits and potentially have a pension or some other kind of investment distribution, which means that when you layer $18,900 in additional withdrawals on top of any number of already existing income sources, you might be pushed into another tax bracket or find other situations you were not expecting.

Arguably, the biggest challenge in this regard is going to revolve around Medicare IRMAA, as Medicare Part B and Part D premiums in 2026 are based on income from 2024. The first income threshold for married couples filing jointly is $218,000. Any RMD that pushes the combined household income across this number doesn't just raise the tax bill, but it also raises Medicare costs two years from now, which is something most retirees don't think about at all until a letter comes from the Social Security Administration.

Adding to the Social Security conversation is that, depending on combined income figures, somewhere between 50% and 85% of a Social Security benefit now becomes taxable income. This is something an RMD counts toward, so any distribution you did not want to take now increases the overall tax burden on income that was already being received.

What You Can Do to Soften the Impact

If you are looking for the most powerful tool available to retirees in these instances, look no further than the qualified charitable distribution. For anyone 70.5 or older, there is an option available to you that will let you transfer money from an IRA directly to a qualified charity, up to $108,000 per year. What makes this so attractive is that this amount counts toward your RMD but doesn't appear as part of your adjusted gross income. The reality is that it won't be treated as income on your tax return, so it's very different than just writing a check to your favorite charity after taking a distribution.

Another option is that Roth conversions done before 73 are a big lever for retirees to pull, though the window has passed if you are already past the age of 73. Assuming retirees have not passed this age, the idea would be to convert portions of a traditional IRA to a Roth account during lower-income years between retirement and when RMDs begin.

The biggest advantage for Roth accounts is that there are no RMDs, so any money that is converted before turning 73 is money the IRS really can't touch as far as distributions go.

Now, let's consider that you are still working at 73. Your current employer's retirement plan is generally not subject to RMDs while you remain actively employed. This does not apply to IRAs or to plans from former employers, but it can provide some flexibility for people still working past the standard start age.

The Bigger Picture

For many retirees, an IRA is simply going to sit in the background, compound, and do so without any kind of tax impact. All of this is going to come to a head, though, when you turn 73, and you suddenly learn that the IRS rules have changed, as they now require you to start taking money out, whether you want to or not. The reality is that the first RMD can feel somewhat harmless, which is especially true if you are fortunate enough to have a sizable retirement account. The problem is that this withdrawal doesn't happen on its own, as it gets added to the rest of your income in any given year and now changes the tax treatment of your Social Security as well as what you expect to pay for Medicare.

This is where an $18,900 RMD can become much more expensive than expected as taking the withdrawal on its own is something most people can stomach, but there are ripple effects of doing so around taxes and IRMAA premiums. When the increased costs actually appear to you on a bill, there is almost nothing that can be done.

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