3 Costly RMD Tax Mistakes to Avoid in Your 70s

Jim and Mary, both 76, were taking their required minimum distributions (RMDs) on schedule each year but missing major tax-saving opportunities. They withdrew their full RMD to their bank account in January, then donated the money to charity in December. They thought they would receive a tax deduction for their $10,000 annual gifts. They were not itemizing deductions, so they received zero tax benefit. Over two years, they missed $2,200 in potential tax savings.

The article identifies three common RMD tax mistakes people make in their 70s.

First, treating your RMD as a standalone event rather than part of an overall retirement tax plan. Jim and Mary focused only on meeting the RMD deadline but did not coordinate it with their charitable giving strategy.

Second, assuming you cannot do Roth conversions once RMDs begin. The article states there are no age limits on Roth conversions. However, two rules apply once you reach RMD age: you cannot convert your RMD itself, and you must satisfy your full RMD before doing any conversion. Jim and Mary used this strategy to help Mary build tax-free money in a Roth IRA, since Jim's minister pension income tax treatment would change if he died first, making Mary's portion fully taxable.

Third, giving to charity but structuring donations incorrectly. If you want a tax benefit from charitable giving when you have an RMD, you can use a qualified charitable distribution (QCD). You must be age 70 ½ or older to use a QCD. You direct your IRA custodian to send money directly to an eligible charity. The distribution does not show up as taxable income to you, but it counts toward your RMD. If you withdraw money to your bank account first and then donate it, you cannot use the QCD rules, and the withdrawal counts as taxable income. Jim and Mary's approach made more of their Social Security taxable as a result.

The author notes that the standard deduction is now so high that many retirees do not itemize. A charitable deduction for non-itemizers allows up to $1,000 for single filers and $2,000 for married filing jointly taxpayers in 2026. Jim and Mary were giving well beyond those limits and receiving no tax benefit.