You’ve Got an IRA Problem: What Could Be Waiting for You in Your 70s

By Dayna Smith

You just turned 65, and retirement is finally here. It’s time to hang up your commuter shoes, step away from business lunches, and spend more afternoons with your grandchildren at the park.

You rolled over your 401(k) and your IRAs are sitting pretty, but after decades of saving, the idea of withdrawing from them makes you feel uneasy. So you do what many retirees do: you tap your taxable investment accounts first and let your tax-deferred accounts keep growing.

It seems smart. It feels safe. But by your 70s, your strategy can become a liability.

Let’s Do the Math

Your IRA keeps growing, and you’re feeling good about the rest of your retirement. But as you approach your 70s, the same IRA that once made you feel financially confident could leave you shell-shocked.

When you leave your IRA alone, the money inside it keeps growing, which is wonderful, until age 73, when the IRS decides it’s time to be paid. 

The culprit? Required minimum distributions (or RMDs).

Starting in your early 70s, the IRS requires you to begin withdrawing money from certain retirement accounts. Your annual withdrawal is calculated using your account balance and a factor from the IRS life-expectancy tables.

At 73, that withdrawal is roughly 3.8% of your balance. By 80, it’s closer to 5%. By 90, it can be nearly 9%.

But the real surprise isn’t just the percentage. It’s the balance those percentages are applied to. If you let your IRA keep growing untouched throughout your 60s and early 70s, your future RMDs could be much larger than expected.

If the IRA balance is $1.5 million at age 73, the first RMD could be around $57,000, added on top of Social Security and any other income.

Ten years later, even if the account grows modestly, that RMD could easily exceed $100,000. And there’s no choice about taking it. Required distributions don’t depend on whether the income is needed.

For someone who spent their working years carefully managing income, being suddenly forced into six-figure withdrawals can push them into a tax bracket they may not have expected. That’s bracket creep.

And it’s just the first wave of taxes.

The IRMAA Surprise

Not many are familiar with the term ‘IRMAA’, typically one of the least understood and most expensive parts of Medicare. By the time they have, they're caught off guard having to pay for it. And rarely at convenient time. 

In 2024, about 7.6 million Americans were affected by IRMAA, and that number is expected to rise to 12.6 million by 2030 as income thresholds lag inflation.

Income-Related Monthly Adjustment Amount, IRMAA, is a surcharge that Medicare adds to your Part B and Part D premiums when your income crosses certain thresholds. The surcharges have a cliff structure, meaning a single dollar over a threshold can move you into a higher bracket and cost you hundreds, sometimes thousands, of additional dollars per year per spouse.

What makes IRMAA particularly tricky is the lookback. The premium you pay this year is based on the income you reported two tax returns ago. So, a large IRA withdrawal at age 72, perhaps a one-time decision to help with a roof, a daughter's wedding, or a grandchild's tuition, can raise your Medicare premiums at age 74. You've long since spent the money. The surcharge still arrives.

For a married couple, the effect is doubled because both spouses pay their own premiums.

Social Security, More Taxable Than You Think

Then there’s Social Security.

Many retirees assume it will be tax-free or only lightly taxed. But once income rises, more of that benefit can become taxable.

For married couples, once provisional income exceeds about $44,000, up to 85% of Social Security may be subject to federal income tax. And $44,000 is not a high bar. A normal Social Security benefit plus even a modest IRA withdrawal can push many couples past it.

That’s when the domino effect begins. RMDs raise taxable income. A higher income can make more of Social Security taxable. It can also trigger higher Medicare premiums through IRMAA.

Three forces. One root cause. A decision made years earlier to leave the IRA untouched.

The Widow’s Penalty: When One IRA Problem Becomes Two

The problem can become even more difficult when one spouse passes away.

If the surviving spouse inherits the IRA, those assets may now be combined with their own retirement accounts. The RMDs don’t disappear, and in many cases, the surviving spouse may be taking required withdrawals from a much larger balance while filing as a single taxpayer.

That’s often called the widow’s penalty: similar or even higher taxable income, but less favorable tax brackets and a lower standard deduction.

The result can be a bigger tax bill at the worst possible time.

A Better Way: Withdrawal Sequencing

Who thought retirement could be this complicated?

By the time RMDs begin, much of the opportunity to avoid higher future taxes may already be gone. That’s why planning needs to start earlier, between retirement and age 73.

At Spain & Smith, we believe in thoughtful withdrawal sequencing: drawing from different account types in a deliberate order instead of draining one account type at a time. Every retirement dollar has a tax cost. Some dollars cost more than others. The key is managing the mix.

In the years before RMDs, your paychecks may have stopped, and if you retired early, Social Security may not have started yet. For the average retiree, these are among the lowest-income years of adult life and among the most valuable planning years.

During this window, small, carefully planned Roth conversions or modest IRA withdrawals may help spread taxes over more years and reduce future RMD pressure. For charitably inclined retirees, qualified charitable distributions (QCDs) can also be a valuable tool after age 70½, allowing IRA dollars to go directly to qualified charities while counting toward RMDs and avoiding taxable income.

Guessing can be expensive. The point is to model your options before the window closes and the tax bill gets harder to manage. 

Withdrawal Sequencing and Estate Planning

What you spend first can affect more than your own retirement. It can also affect what your children inherit.

Many retirees are quick to spend down their taxable brokerage account first. But from a tax standpoint, that account can be one of the best assets to leave behind.

When your children inherit a taxable brokerage account, they may receive a step-up in basis. That means the growth that happened during your lifetime may not be taxed as capital gains.

For example, if you bought an investment for $10,000 and it grew to $250,000, your children may inherit it with a new cost basis of $250,000. If they sold it soon after, they may owe little or nothing in capital gains tax.

That’s why withdrawal order matters. The choices you make in your 60s can affect your taxes in your 70s and what your family eventually receives.

Starting the Conversation

You don’t need to become a tax expert. That’s our job. But you do need to start the conversation early enough that you still have options.

Preserving your IRA makes sense. You spent decades building it. But the strategy that helped you grow your money may not be the best strategy for taking it out.

If you’ve never mapped out which accounts to draw from, when, and why, consider doing so. The earlier we have that conversation, the more tools we have to work with.

At Spain & Smith, we help families turn hard conversations into clear plans. Driven by our Golden Rule+ philosophy, we look beyond the numbers to navigate your financial future with honesty, empathy, and clear communication. By pairing a comprehensive, data-driven approach with a client-centric partnership, we focus entirely on the goals and values that matter most to your family.

Schedule a no-obligation conversation by calling 216-539-0079, emailing info@spainsmith.com, or getting in touch online, and let's shape a legacy your family will respect for generations to come.

Frequently Asked Questions

Should I avoid taking money from my IRA before RMDs begin?

While it can feel smart to leave your IRA untouched as long as possible, that strategy may create larger RMDs later. In some cases, taking modest withdrawals before age 73 can help spread taxes over more years and reduce future tax pressure.

Are Roth conversions always a good idea before RMDs?

Roth conversions can be a powerful planning tool, but they need to be modeled carefully. Converting too much in one year could increase your taxable income, make more of your Social Security taxable, or trigger higher Medicare premiums through IRMAA.

Why does a withdrawal order matter for my heirs?

The accounts you spend first can affect what your family inherits. Taxable brokerage accounts may receive a step-up in basis when passed to heirs, which can reduce or even eliminate capital gains tax on the growth. Traditional IRAs, on the other hand, are generally taxable to beneficiaries when withdrawn. That’s why withdrawal sequencing is also an estate planning decision.

About Dayna

Dayna Smith is a financial advisor and Investment Advisor Representative with Stratos Wealth Advisors at Spain & Smith Wealth Advisors in Pepper Pike, Ohio. She specializes in empowering individuals, families, and pre-retirees by crafting personalized, collaborative financial solutions aligned with their unique values and dreams. Based in the Cleveland area, Dayna holds a degree from Bowling Green State University and enjoys staying active, traveling, and spending time with her husband, Darrin, and their two young sons.

Investment advice offered through Stratos Wealth Advisors, LLC, a Registered Investment Advisor.

Stratos Wealth Advisors, LLC, and Spain & Smith Wealth Advisors are separate entities.

Neither Stratos nor Spain & Smith Wealth Advisors provides legal or tax advice. Please consult legal or tax professionals for specific information regarding your individual situation.