They're 73 With $1.5M Facing RMDs They Don't Need – Our 3-Step Strategy | The Limitless Retirement Podcast

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Danny Gudorf discusses the challenges and strategies surrounding Required Minimum Distributions (RMDs) for retirees. He highlights the financial burden of RMDs and presents three strategic options for managing them effectively: spending the distributions to enhance lifestyle, saving strategically for future needs, and leveraging Qualified Charitable Distributions (QCDs) to minimize tax liabilities. Gudorf emphasizes the importance of proactive planning and annual reviews to optimize tax efficiency and align RMD strategies with overall retirement goals.

The Successful Retiree’s Dilemma: How to Turn Required Minimum Distributions Into a Tax-Saving Opportunity

The IRS may be forcing you to withdraw—and tax—money you don’t even need. But with the right strategy, those mandatory withdrawals can become one of the most powerful wealth tools in your retirement plan.

What if the IRS forced you to take money out of your retirement accounts—money you didn’t need—and then made you pay taxes on it anyway?

That’s not a hypothetical. It’s exactly what’s happening to millions of retirees every year through Required Minimum Distributions (RMDs).

Take Drew and Allie, for example. They’re a hypothetical couple in their early 70s with $1.5 million saved for retirement. This year alone, they’ll owe roughly $13,000 in unnecessary taxes—and over the next decade, that number will climb past $200,000.

If you’re approaching 73 with retirement savings you don’t need to live on, you’re facing the same challenge—and the same opportunity.

The Successful Retiree’s Dilemma

You’ve done everything right. You saved diligently, invested wisely, and built the retirement nest egg you always wanted. Now, the government is requiring you to withdraw money from your IRAs—whether you need it or not—and taxing you on it.

This creates what I call the Successful Retiree’s Dilemma:
 You’re financially secure, but every distribution triggers a new tax bill you’d rather avoid.

The good news? You have more control than you think.

There are three strategic options for handling your RMDs—and only one involves simply paying the tax and moving on.

Option 1: Spend It—Intentionally

Yes, spending your RMD is an option, but it’s about how you spend it.

Many retirees stay stuck in the same “saver’s mindset” they’ve had for decades, even when they can finally afford to enjoy their wealth.

Your RMD could be permission to start living the retirement you planned for:

  • That European cruise you’ve postponed for years

  • The kitchen remodel that turns your house into your forever home

  • Helping children or grandchildren when it matters most

Think of it this way—if you’ve done the planning, spending isn’t wasteful. It’s the reward for years of discipline.

Option 2: Save Strategically

If you don’t want to spend your RMD, you can redirect it with purpose.

After taxes, a $45,000 RMD might net around $35,000. That money can strengthen your financial foundation without just sitting idle in a checking account.

Strategic uses include:

  • Building a larger emergency fund (without overloading cash reserves)

  • Creating a healthcare reserve for long-term care expenses

  • Establishing a “legacy acceleration fund” for future gifting or philanthropy

Some clients use their RMD proceeds to fund life insurance policies, turning taxable IRA withdrawals into tax-free inheritances for their heirs.

It’s about converting a tax obligation into a multi-generational benefit.

Option 3: Leverage Your RMD for Maximum Tax Efficiency

Here’s where the real opportunity begins.

One of the most powerful, yet underutilized, strategies is the Qualified Charitable Distribution (QCD).

If you already give to charity, a QCD lets you donate directly from your IRA—satisfying your RMD requirement while avoiding taxes entirely on the donated amount.

Let’s revisit Drew and Allie. They typically give $15,000 per year to their church and other charities. Instead of donating from their checking account, they can send that $15,000 directly from their IRA.

Result:

  • Their taxable RMD drops from $45,000 to $30,000

  • They avoid taxes on the donated amount

  • They keep more cash in their bank account for personal use

Even better, QCDs can start at age 70½, meaning you can get ahead of the tax problem before RMDs even begin.

For many retirees, this single move saves thousands in taxes each year while aligning with the causes they care most about.

Bonus Opportunities: Go Beyond the Basics

Your RMD planning doesn’t end there. Here are three advanced strategies that can multiply your savings:

  1. Reinvest the Remainder
     After taxes, reinvest your RMD proceeds in a taxable account. You’ll continue earning potential growth while keeping liquidity—and you can harvest investment losses to offset future gains.

  2. Strategic Gifting
     Use your RMD to make annual gifts (up to $18,000–$19,000 per person under current IRS limits) to children or grandchildren. You’ll reduce your taxable estate and help loved ones when it counts most.

  3. Roth Conversion Coordination
     You can’t convert your RMD itself into a Roth IRA—but you can take additional distributions beyond your required amount and convert them.
     This can be incredibly powerful if:

    - You expect to be in a higher tax bracket later

    - You want to leave tax-free assets to your heirs

The key is to compare today’s tax rate to your projected future rate. Sometimes paying taxes now saves you—and your family—far more later.

The Advanced Play: RMD Smoothing

One of the lesser-known strategies my team uses is RMD Smoothing.

Instead of withdrawing your full RMD in December, spread it evenly across the year. This approach gives you:

  • Tax bracket control (avoid spiking income in one quarter)

  • Market timing flexibility (sell when it’s advantageous)

  • Room to coordinate with Roth conversions and tax-loss harvesting

Think of it as the difference between driving your retirement tax plan—and letting it drive you.

Why Annual RMD Planning Matters

Here’s a mistake I see constantly: retirees treat RMDs as a one-time decision.

In reality, your RMD plan should evolve every year as your:

  • Income changes

  • Tax brackets shift

  • Charitable goals evolve

  • Market conditions fluctuate

A proactive advisor reviews your RMD strategy annually—before the IRS deadline, not after.

The goal? Keep your money working for you, not against you.

The Bottom Line: RMDs Don’t Have to Be a Burden

Let’s go back to Drew and Allie one more time. Here’s how their optimized strategy looks:

  • $15,000 directed as a QCD to charities

  • $20,000 gifted to their grandchildren’s 529 college plans

  • $10,000 reinvested in a tax-efficient portfolio

That simple reallocation saves them roughly $4,000 per year in taxes—money that would’ve otherwise gone straight to the IRS.

With the right planning, RMDs aren’t a punishment. They’re an opportunity—to control your tax exposure, strengthen your legacy, and enjoy the retirement you worked so hard to build.

Your Next Move

If you’re nearing age 73 (or already there), your window for smart RMD planning is wide open—but it won’t stay that way forever.

Before you take your next distribution, make sure you understand how RMDs fit into your entire retirement income plan. And don’t overlook the single most overlooked tax strategy for retirees—Roth conversions in your 70s.

That’s where the real lifetime savings can begin.

👉 Watch our next video: Should You Do a Roth Conversion in Your 70s?
 At the 8-minute mark, we reveal the exact three-step process we use with our highest net-worth clients to turn retirement taxes into lasting wealth opportunities.

*This blog post is based on the insights shared by Gudorf Financial Group. For personalized advice tailored to your unique circumstances, always consult a financial, legal, or tax professional.*

Transcript: Prefer to Read — Click to Open


Danny (00:00.079)

What if the IRS forced you to draw money you didn’t need and pay the taxes on it anyways? That’s exactly what’s happening to Drew and Allie, a hypothetical couple I created to illustrate this very real problem that we see with clients all the time. They’re 73 with $1.5 million saved for retirement, and this year alone, their required minimum distributions will cost them

$13,000 in unnecessary taxes. What about over the next decade? Over $200,000 gone to taxes. If you’re approaching 73 with retirement savings that you don’t need to spend or live on in retirement, you’re facing the same choice they are. I’m Danny Goodarff, founder of Goodarff Financial Group. Over the past 15 years, my team and I have helped hundreds of clients

in this exact situation, cut their RMD tax bill and build a tax plan for retirement. In this video, I’ll walk you through the exact multi-step strategy we’re using with clients facing this required minimum distribution problem and go through exactly what you need to do. You’ll see how to turn what most people view as a tax burden into an opportunity to build lasting wealth. This creates what I call

the successful retirees dilemma. You’ve done everything right, you’ve saved diligently, and now the government is forcing you to take money that you don’t need out of your IRAs, creating a tax bill you’d rather avoid. But here’s what most people don’t realize. You have three strategic options, and only one of them involves simply paying the tax and moving on. Your first option is to spend it. I know this sounds obvious, but hear me out.

When I tell clients like Drew and Allie, they can spend their RMD, I’m challenging them to think differently about their retirement lifestyle. You’ve spent decades in a savings mindset, but now you’re in the position where you can afford to enhance your retirement and your lifestyle. Maybe it’s the European cruise you’ve always been dreaming of, or maybe upgrading your home with that new kitchen or bath, or maybe you have children or grandchildren.

Danny (02:22.924)

that you’d like to help out. The key is recognizing that these forced distributions might actually be the permission you need to enjoy the decades of saving that you’ve done. Your second option is to save strategically. After paying the taxes on that $45,000 RMD, you might net around $35,000, depending what tax bracket you’re in. This money can serve specific purposes

in your overall retirement plan. You could build in a larger emergency fund, but we don’t want too much cash to be sitting in your bank accounts. Or you could create a dedicated healthcare reserve for future long-term care costs or establish what I call a legacy acceleration fund for gifting. Some clients use their RMD proceeds to fund life insurance policies that will provide tax-free death benefits to their heirs, essentially

converting their taxable IRA money into a tax free inheritance. But the third option is where the real opportunities lie in leveraging your RMD for maximum tax efficiency. The most powerful strategy you have here is what we call a qualified charitable distribution or QCD. If Drew and Allie are already giving to charity, which many people their age are, they can send money directly from their IRA

to these qualified charities. This will satisfy the RMD requirement while avoiding the taxes entirely on the donated amount. Let’s say they normally give around $15,000 per year to their church and other favorite charities using after-tax dollars from their bank account. Instead, they could direct that $15,000 of their RMD straight to these organizations, reducing

their taxable RMD down to 30,000 and keeping that money in their bank account for other needs. Here’s where it gets even more strategic. You can do QCDs starting at age 70 and a half, even before RMDs kick in at 73 or 75. This means you could proactively start managing your tax situation years before required minimum distributions kick in.

Danny (04:47.478)

I’ve seen clients save thousands of dollars in taxes annually just by redirecting their charitable giving from their bank accounts to their QCDs using their IRAs. For the remaining RMD amount, you have several leveraging options. One strategic approach is to reinvest that money with other investments that you may have. You can take the distribution, pay the taxes,

and then reinvest the proceeds in a taxable account. Throughout the year, you’ll have those investments potentially returning gains for you, and you can also harvest losses in this account to offset other gains you may have creating ongoing tax benefits. Another approach is a gifting strategy. You can gift up to around $18,000 $19,000 per year per person without any gift.

tax consequences. If Drew and Allie have children or grandchildren, they could use their RMD proceeds to make these annual gifts, removing money from their taxable estate while helping family members when they can, and most of them need that money most of all. There’s also the Roth conversion opportunity that many people miss. While you can’t avoid RMDs, you can take additional distributions beyond the required amount

and convert them to Roth IRAs. This is particularly powerful if you’re in a lower tax bracket now, then you would be later on in retirement as your RMDs get larger. Or if you want to leave a tax-free legacy behind to your heirs. The key is to run the numbers to see if paying taxes now at your current rate makes sense compared to what tax rates would be on later in retirement.

or potentially what your beneficiaries may have to pay if they inherited these IRA accounts. One advanced strategy that we use is what I call RMD smoothing. Instead of taking the entire RMD out in December, which many people do, what you do is you spread it throughout the year. This gives you more flexibility to manage your tax brackets, take advantage of market timing for distributions, and coordinate

Danny (07:09.994)

other tax planning strategies like Roth conversions or tax lost harvesting. Here’s something crucial that Drew and Allie will need to learn. This isn’t a one time decision. Your RMD strategy should be reviewed annually because your situation changes. Your RMD amount increases each year, your tax brackets might shift, your charitable giving might change, and market conditions affect your options.

A good financial advisor will bring proactive strategies to you and to this conversation each year, not waiting for you to ask. The biggest mistake I see people make is waiting until age 73 to start thinking about their RMD planning. If you’re in your 60s or early 70s, you have time to start positioning yourself strategically. This might involve Roth conversions while you’re in lower tax brackets, building up

charitable giving plans or restructuring your portfolio to minimize the tax impact of future distributions. For Drew and Allie, we need to develop a comprehensive approach. So in this example, they’re going to be doing a $15,000 QCD to cover their charitable giving. $20,000 for strategic gifting to their grandchildren’s 529 plans and reinvesting the remaining $10,000

after taxes into a tax-efficient portfolio in their taxable account. This approach saves them approximately $4,000 in taxes annually compared to simply taking the distributions and paying the tax. The key insight here is that RMDs don’t have to be a burden. With proper planning, they can become another tool in your retirement income strategy. Whether you’re spending, saving,

or leveraging these distributions, the goal is to maintain control over your tax situation and align your RMD strategy with your overall retirement plan. Remember, everyone’s situation is unique. Your income sources, your tax brackets, how charitably inclined you are, your family situation, and what your legacy goals are. All of these factor into the optimal RMD strategy. The framework I’ve shared today gives you the foundation

Danny (09:33.058)

but the specific implementation should be tailored to your unique circumstances. Now that you understand how to turn required minimum distributions from a tax burden into an opportunity, you’re ready to control your retirement tax planning. However, RMDs are just one piece of the retirement income puzzle, and there’s a crucial strategy that can dramatically reduce your lifetime tax bill that most retirees completely overlook.

Before you implement any RMD strategy, you need to understand how Roth conversions can work alongside your distribution planning to potentially save you tens of thousands of dollars on your retirement. Click the video right here to watch, should you do a Roth conversion in your 70s to discover the advanced tax strategy that could transform your entire retirement income plan.

Don’t miss this three-step process that I reveal at the eight-minute mark where it shows you the exact system we use with our highest net worth clients.

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