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A Kiplinger report recounts how a couple in their 70s met their required minimum distributions but missed potential tax benefits by taking the money into a bank account before donating it. The report highlights three planning issues: treating RMDs separately from other income, assuming Roth conversions are off-limits after RMDs start, and overlooking qualified charitable distributions. The tax outcome depends on individual circumstances and current rules.
A Kiplinger report describes how a retired couple, both 76, met their required minimum distribution (RMD) obligations but missed potential tax savings by withdrawing money from their IRA before making charitable gifts. The account illustrates three planning issues for retirees: coordinating RMDs with other income, considering Roth conversions, and arranging charitable donations so they may qualify as qualified charitable distributions (QCDs).
In the report, financial adviser Jim and Mary said they took their RMDs each January and deposited the money in a bank account. Later in the year, they donated about $10,000 annually, an amount the report says matched their full RMD. They kept records expecting to claim charitable deductions, but they did not itemize deductions on their tax returns. The adviser says they therefore received no charitable deduction for those gifts through itemizing.
The adviser reports that the couple missed $2,200 in tax savings in each of 2021 and 2022. That figure is the adviser’s account of their situation, not a general estimate for retirees. Their gifts were made after the IRA distributions reached their bank account, so they could not treat those withdrawals as QCDs. A QCD generally requires an IRA custodian to send the distribution directly to an eligible charity; it can count toward an RMD while being excluded from the donor’s taxable income, subject to applicable rules.
The report’s other two cautions are to treat RMDs as part of an overall tax plan and not to assume age or RMD status alone rules out Roth conversions. It says a conversion may be considered after the RMD is satisfied, but the RMD itself cannot be converted. Whether a conversion makes sense depends on projections of taxes for the account holder, a surviving spouse or heirs.
How RMD Choices Affect Taxable Income
RMD decisions can affect more than whether a retiree has withdrawn the required amount. A taxable IRA distribution can raise income used in calculations that affect how much of a person’s Social Security benefits are taxable. The report also says income levels may affect eligibility for an enhanced senior deduction in 2026. The exact impact depends on the taxpayer’s income, filing status and the rules that apply for that year.
Charitable giving is another reason the sequence matters. A retiree who wants to donate IRA assets may need to arrange a direct transfer from the custodian to an eligible charity rather than first taking the distribution personally. A QCD and an itemized charitable deduction are different tax treatments; a donor should not assume the same gift qualifies for both. The couple’s experience shows how following the withdrawal deadline alone may not capture available planning options.
Roth conversions also involve a trade-off: the converted amount generally creates taxable income in the year of conversion, while qualified Roth withdrawals may receive different tax treatment later. The report presents conversions as a planning possibility, not a recommendation for every person in their 70s. A conversion can affect current taxes and other income-related calculations, so comparing projected outcomes matters more than relying on age alone.
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The Couple’s RMD and Giving Sequence
The account begins with Jim and Mary, a couple described as 76 years old who had taken RMDs for several years. Jim said they withdrew the required amount each January because they did not want to miss a year. In December, they decided which charities to support and donated the money from their bank account. Their assumption was that the gifts would produce a tax deduction.
The adviser says a review of their returns showed they were not itemizing deductions, so their charitable gifts did not generate the expected itemized deduction. The report says that, had they instead arranged eligible direct transfers from the IRA to charity, the couple could have used QCD treatment, which would have counted toward their RMD while keeping the amount out of taxable income, subject to the rules. The report identifies their minister’s pension as another planning factor: it says Mary’s pension income would become fully taxable if Jim died first, prompting consideration of annual Roth conversions after satisfying the RMD.
The report also notes a charitable deduction for some non-itemizers in 2026, listing limits of $1,000 for single filers and $2,000 for married couples filing jointly. Those figures are presented in the source material as 2026 provisions. They do not establish what any particular taxpayer can claim; eligibility and applicable law should be checked for the relevant tax year.
“We don’t need the income, but we have to take out the RMDs.”
— Jim, as quoted in the Kiplinger report
Tax Results Depend on Individual Circumstances
The couple’s reported $2,200 annual tax savings is specific to their circumstances and the years discussed. The source does not provide their complete returns, tax brackets, account balances or a calculation showing how the savings were determined. Readers should not treat that figure as a typical outcome or a guaranteed result of making QCDs.
The report does not establish that a Roth conversion would benefit every retiree, or specify a conversion amount that would suit other households. The effects can depend on taxable income, pension benefits, Social Security, charitable plans, filing status and future tax rules. Eligibility for QCD treatment, the amount that can be transferred, and the 2026 deductions mentioned in the report should be verified against current IRS guidance. The source also does not detail any later changes to the couple’s plan or the final tax results from their proposed conversions.
Review Withdrawals Before Year-End
Retirees approaching or already taking RMDs can review the timing, destination and tax treatment of planned withdrawals before making them. Those who give to charity from an IRA can ask their custodian and tax professional whether a direct transfer to an eligible organization may meet QCD requirements, and confirm that the distribution is properly documented. The RMD must still be satisfied for the year.
Anyone considering a Roth conversion should first account for the year’s RMD and compare the projected tax effect of a conversion with potential future outcomes for the account holder and surviving spouse. The report provides no universal deadline or recommended conversion amount. Tax rules and individual returns will determine the next steps.
Key Questions
What is the main RMD mistake described in the report?
The couple withdrew their RMD into a bank account, then donated the money later. According to the report, that sequence meant the gifts could not be treated as qualified charitable distributions.
Can an RMD count as a qualified charitable distribution?
A direct transfer from an IRA custodian to an eligible charity may count toward an RMD and be excluded from the donor’s taxable income if applicable requirements are met. The rules and limits should be checked for the relevant tax year.
Can someone make a Roth conversion after RMDs begin?
The report says there is no age-based bar to Roth conversions, but the current-year RMD must be taken first and cannot itself be converted. Whether converting additional IRA money is tax-efficient depends on the individual’s situation.
Did the couple save $2,200 every year?
The adviser says the couple missed $2,200 in tax savings in each of 2021 and 2022. That is a reported result for their circumstances, not a standard savings amount for other retirees.
Source: kiplinger.com
