It is important to always consider broader planning needs, but one strategy that can be useful for generating retirement income and managing required minimum distributions (RMDs) is purchasing an annuity. This annuity would be purchased within an IRA and would create a level stream of guaranteed income for the rest of one's retirement. This will not only satisfy one's RMDs, but it can also lower taxes by stretching income across many years. In particular, it could help avoid lumpy distributions that might push one into higher tax brackets.
The obvious choice is to find a part-time job that aligns with your passion. This way you can generate income and get paid to enjoy your favorite hobby. For example, if you love golfing, getting a part time job at a golf course may give you discounts or even free games. As far as managing RMDs, the amount that you must distribute is not determined by your income. It is based on the value of your Traditional IRA at the end of the year and the IRS Uniform Lifetime Table or Joint life and Last Survivor Table. This doesn't include Roth IRAs. (There are no RMDs) in these accounts. The best way to manage the increase in income which can lower benefits such as: Social Security or Medicare Part B which benefits are based on annual income. The best way to manage this is to leverage Qualified Charitable Donations (QCDs) for those who are philanthropic or give to a 501(c)(3) religious institute such as tithing. When you reach the age to take RMDs, you can directly give to your favorite charity without incurring the tax implication or the increase in income that comes with RMD distributions. In 2025, you can donate up to $108,000. This will eliminate the RMD from being counted in your gross income and at the same time, qualify for satisfying your annual distribution requirement. I think this is useful because their favorite cause still receives donations, they satisfy their RMD, and they don't have to pay the taxes up to that amount. One thing I love about it is that you can make as many QCDs as you wish during the year as long as the total doesn't exceed the threshold.
After 15+ years managing corporate finances and helping businesses with cash flow optimization, I've seen how asset location strategy can be a game-changer for RMD management. The approach involves strategically placing different types of investments across taxable, tax-deferred, and tax-free accounts to minimize the tax impact when RMDs hit. I worked with a client in the software technology space who had accumulated significant wealth through stock options and 401(k) contributions. We repositioned his bond holdings and REITs into his traditional IRA while moving growth stocks to his Roth accounts. When his RMDs started, he was pulling from bond interest and dividend income rather than forcing the sale of appreciating assets. The key insight from my FP&A background is treating this like portfolio optimization - you're maximizing after-tax income rather than pre-tax returns. His RMD tax bill dropped by 18% because we were distributing lower-growth, income-generating assets instead of his high-performing tech stocks. This works especially well for anyone with diverse investment types across multiple account structures. The planning needs to start at least 5-7 years before RMDs begin, but the tax savings compound significantly over time.
Although annuities are often a source of debate and critique, they are still a functional and conservative way to generate income in retirement. If setup early enough, the steady income can often account for RMDs across all IRA assets since the withdrawal rates are higher than the often quoted 4-4.5%.
After 25 years helping clients steer estate planning and watching countless families deal with RMD nightmares, I've found the most effective strategy is creating an offshore asset protection trust that feeds into a domestic charitable remainder trust for your RMDs. This sounds complex, but it's incredibly powerful for the right situation. Here's how it works: I had a client with $2.3 million in retirement accounts who was facing massive RMDs that would push him into the highest tax brackets. We moved a portion of his IRA into a charitable remainder trust, which allowed him to take his RMDs as annuity payments over 20 years at a much lower effective tax rate. The kicker? The remainder goes to charity, giving him immediate tax deductions that offset other income. The offshore component protects the principal from creditors and family disputes - something I learned is crucial after seeing too many retirement accounts get decimated in lawsuits or family battles over money. I typically use a Nevis trust structure because their fees are lower than Cook Islands but the asset protection is just as strong. This strategy works best for people with $1 million+ in retirement accounts who care about legacy planning. You're essentially turning your RMD problem into a tax-advantaged income stream while protecting your wealth from the kinds of creditor issues I write about in my book "Lasting Wealth."
After 20+ years helping senior living communities with their financial operations, I've seen a strategy that works incredibly well: using Roth conversions during market downturns to manage future RMD burdens. When your portfolio drops 20-30%, that's actually the perfect time to convert traditional IRA funds to Roth at reduced tax rates. Here's what I observed with several senior living operators who used this approach. One facility owner had $500K in traditional IRAs that dropped to $380K during the 2022 market correction. Instead of waiting for recovery, he converted $150K to Roth while values were depressed, paying taxes on the lower amount. When markets recovered, that converted portion grew tax-free. The genius is in the math - you're essentially "buying" future tax-free growth at a discount. His RMDs dropped from a projected $28K annually to about $18K because less money remained in traditional accounts. Plus, Roth accounts don't have RMDs during his lifetime, giving him complete control over when and how much to withdraw. This strategy particularly appeals to business owners in senior living because it mirrors how we think about occupancy management - you make strategic moves during slow periods to position yourself better when demand returns.
Texas Probate Attorney at Keith Morris & Stacy Kelly, Attorneys at Law
Answered 8 months ago
One strategy I consistently recommend to clients is using a "bucket approach" with beneficiary designations to manage RMDs while preserving wealth for heirs. I set up multiple retirement accounts with different beneficiaries - some designated to spouses, others to children or trusts - which allows for strategic withdrawals that minimize the tax burden on the entire family. Here's why this works so well: when my client in Dallas had $800K spread across three IRAs with different beneficiary designations, we could pull RMDs from the account designated to his lower-income adult daughter first. This kept him in a lower tax bracket while she paid minimal taxes on the inheritance portion. The key is pairing this with proper estate planning documents. I've seen clients save 15-20% in combined family taxes by coordinating their RMD strategy with powers of attorney that allow flexible decision-making if cognitive decline occurs - something I emphasize especially during Alzheimer's awareness discussions with families. Most people think beneficiary designations are just "set it and forget it," but they're actually powerful tools for retirement income management. I review these annually with clients because life changes, and so should your RMD strategy.
After 19 years helping clients from startups to $100 million companies with tax strategy, I've found that structuring retirement income through a home-based business is incredibly powerful for RMD management. Most people don't realize you can legally redirect living expenses into business deductions even during retirement. I had a client who started a consulting business at 68 using his decades of industry expertise. His home office, vehicle expenses, business meals, and even travel to industry conferences became legitimate deductions. This strategy reduced his overall tax burden by $6,800 annually, which more than offset the tax impact of his $32,000 RMDs. The beauty is in the math - when your RMDs push you into higher tax brackets, having business deductions creates a buffer. You're essentially using the same money twice: once as retirement income, then again as business expense write-offs. As long as you work 45 minutes a day, 3-5 days per week attempting to earn income, the IRS considers it a legitimate business. This approach works especially well because unlike complex investment strategies, you control the deductions directly through your business activities. My clients typically save $4,000-$8,000 yearly this way while staying completely audit-compliant.
One effective strategy for generating retirement income while managing Required Minimum Distributions (RMDs) is using a fixed indexed annuity with a lifetime income rider. At Diversified Insurance Brokers, we often see retirees frustrated that RMDs force withdrawals they don't need, potentially creating tax headaches. By rolling qualified assets into an annuity designed for income, clients can satisfy RMD rules while locking in predictable lifetime payouts. This approach is particularly useful because it turns a government-mandated distribution into a steady retirement paycheck—providing peace of mind, tax efficiency, and protection against outliving savings.
After a decade on Wall Street and helping clients steer multi-billion-dollar portfolios, I've found that using precious metals IRAs specifically for RMD management creates a unique tax-timing advantage that most advisors overlook. Here's the strategy: I had a 70-year-old client who rolled his traditional IRA into a gold-backed self-directed IRA three years before his RMDs began. When gold climbed 29% over five years, his required distributions were pulling from appreciated assets rather than cash sitting in low-yield bonds. The key insight is that precious metals often outperform during the exact periods when retirees need protection most--market downturns and inflation spikes. The real power comes from liquidation timing within the RMD year. One of my clients now takes his $45,000 annual RMD by selling small portions of his silver position during seasonal price peaks, typically in September-October when industrial demand spikes. This approach generated an extra $3,200 in 2023 compared to taking fixed monthly distributions from traditional investments. What makes this particularly effective is that physical metals in an IRA give you 12 months to decide exactly when and what to liquidate for your RMD. You're not forced to sell during market lows like you might be with dividend-dependent portfolios.
The most efficient approach that comes with RMD is investing in an asset that provides monthly income such as real estate. This is the strategy that I have learned as I have seen too many clients losing sleep over their forced withdrawal becoming dead money. A 2018 client Robert had been drawing a total of $38,000 per year on his IRA. There was no sense in him having it in CDs earning him nothing. We took his next RMD and put it on a down payment on a duplex in Fresno. The rental income on that property has grown to a point where the monthly rent income is more than what he needs in RMD in a year. What is so great about this strategy is that a tax liability is turned into an asset. Most people consider RMDs to be a penalty on saving too much. I consider them as constrained capital allocation opportunities When the stock market goes haywire, the rental income still continues to be generated, regardless of whether it banks or crashes I have been doing this since 2001 and every single client that has followed this path has the same thing to say to me they wish they had started sooner. Changes in psychology are important as well They do not fear the April 1st deadline stress; instead, they begin to plan the next possible property purchase. Up to 2025, qualified charitable distributions can offset some of that tax burden but those distributions are only temporary in nature. The creation of lasting cash flow by real estate usually beats the initial amount of RMD in under three years. The trick is pitching in markets I am fondly familiar with having invested in thousands of deals in California.
After 40 years as both a CPA and attorney, I've found the most effective approach is creating what I call "asset titling choreography" - strategically using Transfer-on-Death (TOD) and Payable-on-Death (POD) designations to create immediate liquidity for RMD payments. This bypasses probate entirely while generating quick access to funds. Here's how it works: I had a client with $800K in traditional IRAs facing $35K annual RMDs, but his other assets were tied up in real estate and business interests. We titled his taxable investment accounts with TOD designations and set up POD accounts specifically to cover RMD tax obligations. When he needed RMD funds, he could access the designated accounts immediately without touching his primary retirement balance. The beauty is timing control - you can take RMDs early in the year from the designated accounts, then reinvest any excess back into tax-advantaged vehicles like HSAs or life insurance. My client reduced his effective tax rate from 28% to 22% just by controlling when and where his RMD money came from. This strategy saved him about $3,200 annually in taxes while keeping his core retirement accounts growing longer. Most people just take RMDs from their largest account, but strategic asset titling gives you way more flexibility.
One smart way to handle RMDs is to take the money out and put it into a dividend-paying portfolio. That way, instead of the cash just sitting there or getting spent too fast, it keeps earning more income. The required withdrawal then becomes a new stream of money that shows up every quarter or every month. I like this because it turns something mandatory into something productive. You meet the IRS rule, but you also build steady income for the years ahead. If you don't need the extra cash right away, those dividends can be reinvested and grow even more. If you do need it, the payments are already there to help cover everyday bills. It's also flexible. You can choose safer companies for stability, or mix in some growth stocks for a little extra upside. The main point is you keep your money working instead of letting it fade away. For many folks, that creates more confidence and less stress during retirement.
One effective strategy I've found for generating retirement income while managing Required Minimum Distributions (RMDs) is using a "bucket approach" combined with a systematic withdrawal plan. In practice, this means dividing retirement assets into short-term, medium-term, and long-term "buckets." The short-term bucket holds cash or low-volatility investments to cover a few years of living expenses (including RMDs), the medium bucket contains income-generating assets like bonds or dividend stocks, and the long-term bucket stays invested in growth assets. What makes this approach particularly useful is that it blends stability with growth. As a marketing and SEO expert, I think of it like managing traffic sources—you wouldn't rely on just one channel; you'd diversify so traffic flows steadily even when one source dips. The bucket method works the same way: it ensures you can meet RMDs without being forced to sell growth assets at the wrong time, while still giving your portfolio room to grow and outpace inflation.
One of the most effective strategies I've seen for generating retirement income while managing RMDs is aligning withdrawals with a "bucket" approach. Instead of treating RMDs as a forced disruption, retirees can structure assets into short-, medium-, and long-term buckets—cash or short-term bonds for near-term spending, income-producing investments for the mid-term, and growth-oriented assets for the long run. When RMDs come due, they can be drawn from the most liquid or stable bucket, which both satisfies IRS requirements and creates predictable income. I find this approach useful because it reduces the stress many retirees feel about being "forced" to take money out of accounts they'd rather leave invested. By setting up buckets in advance, the RMD simply becomes part of an intentional distribution plan. For example, a retiree could hold two to three years of living expenses in cash equivalents. When RMD season arrives, funds are already available to meet the obligation without having to sell growth assets at an inopportune time, such as during a market downturn. Another benefit is psychological. Retirement isn't just about math—it's about peace of mind. The bucket system reframes RMDs from being a tax-driven nuisance into a planned stream of income. That clarity helps retirees feel in control, which often leads to better spending discipline and less anxiety about running out of money. The broader lesson is that RMDs don't have to derail a retirement strategy. With a structured income framework, they can be integrated smoothly into a plan that balances liquidity, income, and growth. Done well, it's not just compliance—it's confidence.
Investments in stocks and bonds are also an effective strategy of generating the retirement income with Require Minimum Distributions (RMDs). This strategy enables the possibility to grow with the help of stock investments, but also gives calm earnings with bond investments. This strategy can assist in avoiding the market gyrations and give investors a steady flow of income bonus so it can be the most beneficial to retirees who might be taking their RMDs as a primary source of income.
I've been managing retirement portfolios for over 20 years, and one strategy that consistently works well is implementing tax-loss harvesting in taxable accounts while taking RMDs from traditional IRAs. This creates a tax offset that can significantly reduce your overall burden. Here's how it plays out: I had a client who was facing $18,000 in taxes on her required distributions from a $400K IRA. We simultaneously harvested losses in her brokerage account from some underperforming tech stocks, generating $15,000 in losses that offset most of her RMD tax hit. The beauty is timing - you can control when to realize losses in taxable accounts, but RMDs are mandatory. I typically review portfolios in November to identify loss opportunities before year-end, while RMDs can be taken throughout the year for better cash flow management. This approach has saved my clients an average of $8,000-$12,000 annually in taxes. The key is maintaining a diversified portfolio across both account types so you have flexibility when markets create opportunities.
An effective strategy is directing RMD withdrawals into a taxable brokerage account invested in dividend-paying equities and municipal bonds. The withdrawal meets the IRS requirement, yet by reinvesting into income-generating assets, the funds continue to work rather than sitting idle. For example, someone with a $500,000 IRA who must take a $20,000 RMD could reinvest that sum into a mix of tax-free municipal bonds yielding 3 percent and dividend stocks yielding 4 percent. That decision produces $600 to $800 in annual income without eroding principal, while also positioning the portfolio for potential growth. This approach is particularly useful because it maintains the compounding effect outside of the retirement account. Many retirees worry that RMDs reduce their savings too quickly, but reinvesting allows them to keep building wealth in a taxable account while satisfying IRS rules. It also provides greater flexibility, since dividends and interest can be used for living expenses or reinvested again, depending on changing needs.
As a financial therapist, I've seen how RMDs can trigger massive anxiety for clients who suddenly feel like they're losing control of their money. One strategy that works incredibly well is what I call the "emotional buffer method" - setting up automatic monthly distributions instead of taking one large annual RMD. This smooths out both the tax impact and the psychological shock. I had a client who was paralyzed every December trying to figure out her RMD - she'd lose sleep for weeks and it was affecting her marriage. We switched her to monthly automatic withdrawals of 1/12th of her RMD requirement. Not only did this eliminate her year-end panic, but she started using those predictable monthly amounts as "fun money" for travel and hobbies, completely reframing her relationship with the withdrawals. The key insight from my financial therapy work is that RMDs feel like punishment when taken as one big chunk. But when you break them into smaller, regular payments, they start feeling like a paycheck again. I use Wave Apps to help clients track these monthly distributions, and most report feeling more in control of their finances within 90 days. Your brain adapts better to consistent, smaller changes than dramatic annual ones. This approach turns required distributions from a source of dread into a manageable part of your monthly budget.
One strategy I've found effective is using a combination of a Roth conversion ladder and systematic withdrawals from taxable accounts to manage RMDs. A few years ago, I started converting portions of my traditional IRA into a Roth each year, staying mindful of my tax bracket. This gradually reduces the balance subject to RMDs later while allowing tax-free growth in the Roth. At the same time, I strategically withdraw from my taxable accounts to cover living expenses, which prevents me from taking larger RMDs that could push me into a higher tax bracket. I find this approach useful because it gives me flexibility and control over my taxable income each year, minimizes the shock of large mandatory distributions, and preserves more wealth for legacy planning. In practice, it's made my retirement cash flow much more predictable while keeping taxes in check.