M: Minimize
RMDs can be minimized by converting pre-tax amounts in traditional IRAs to Roth IRAs to the extent it can be done at lower rates. With income tax rates set to increase after 2025, a series of partial conversions (staying within current tax brackets) by pre-retirees can reduce the balance in their traditional IRAs and thus reduce their RMDs in future years.
Action plan: take advantage of lower income tax rates now
Roth IRAs may make even more sense now after tax reform. With income taxes temporarily reduced, it may make sense to contribute directly to Roth IRAs. It may even make sense for IRA owners to convert amounts in traditional IRAs to the extent they can do so in lower brackets. IRA owners who expect that they and their beneficiaries will always be in a very high tax bracket may want to convert their entire IRA as quickly as they can.
It's important to consider the effect of any conversion and increased adjusted gross income on applicable capital gains tax rates, Social Security benefits taxation and Medicare premiums.
We will discuss the third key to RMD here.