At age 73, investors must begin taking distributions from tax-deferred retirement accounts, even if still working. One exception: many workplace plans let you delay RMDs from your current employer’s plan until you retire if you are still employed and own no more than 5 percent of the business; IRAs and former employers’ plans get no such break. (Those born in 1960 or later start at age 75.) If you fail to take the full required minimum distribution (RMD), the IRS charges a 25 percent penalty on the shortfall, reduced to 10 percent if corrected within about two years. The rules cover traditional IRAs along with 401(k) and 403(b) plans; Roth IRAs and Roth 401(k)s are exempt during the owner’s lifetime, though inherited Roth accounts are.

Each year’s deadline is Dec. 31. Your RMD amount is fixed by your balance on the prior Dec. 31, so timing does not change what you owe; waiting until year end simply keeps the money growing tax-deferred longer. The initial RMD is due for the year in which you turn 73. You can wait as late as April 1 the following year, but that stacks two distributions into a single tax year, which could push you into a higher bracket. RMDs are taxed as regular income.

Roth Conversion

If you expect RMDs to push you into a higher bracket, shrink your tax-deferred balances before they begin. In the years before age 73, ideally low-income years after you retire, you can convert part of a traditional IRA or 401(k) to a Roth IRA. A conversion moves money directly from the pre-tax account to the Roth, so the annual Roth contribution limit, earned-income requirement and 10 percent early-withdrawal penalty do not apply. The amount converted is taxed as regular income that year, but the assets then grow tax-free with no lifetime RMDs. Two cautions: once RMDs begin, the year’s RMD must be withdrawn first and cannot itself be converted, and each conversion carries its own five-year holding period.

In-Kind Distributions

An in-kind RMD transfers securities from your retirement account to a taxable brokerage account without selling them first. The RMD amount is still taxed as regular income, but the shares stay invested. Because no cash changes hands, nothing is withheld; most custodians ask you to waive withholding or sell enough shares to cover it. If you waive it, cover the tax through estimated payments to avoid an underpayment penalty.

Your cost basis resets to the shares’ fair market value on the distribution date, and a new holding period begins. Growth after that is taxed at the lower long-term capital gain rate once the shares have been held more than a year.

For example, assume you distribute stock worth $20,000 that was bought inside the IRA for $12,000. The full $20,000 is taxed as regular income, not just the $8,000 of growth, because none of that money has been taxed yet. Your basis in the taxable account becomes $20,000, so you later pay capital gains tax only on appreciation above that.

Batching RMDs – Or Not

Many retirees hold more than one IRA (traditional, rollover, SEP or SIMPLE), and each has its own RMD. Although each account’s figure is calculated separately, you may add them together and withdraw the combined amount from whichever of those IRAs you prefer. The same rule applies among 403(b)s. You may not aggregate across account types: each 401(k) requires its own RMD, and inherited IRAs cannot be combined with your own (only with each other, if from the same decedent).

Qualified Charitable Distributions (QCD)

For the charity minded, a qualified charitable distribution has your IRA custodian pay a charity directly on your behalf. The amount satisfies some or all of your RMD yet never enters your taxable income, which lowers your adjusted gross income and helps whether or not you itemize. QCDs are available from age 70½, must come from an IRA (not a 401(k)), must be paid by the custodian directly to the charity, and cannot go to donor-advised funds or private foundations. The 2026 cap is $111,000 per person. Tell your tax preparer; the 1099-R will not flag it.

The purpose of estate planning is to distribute your assets to heirs in a formal, legal process. If you do not have any heirs to speak of, you might not feel the need to do this. However, your assets will go somewhere, so you may want to have control over that before the state steps in to decide for you.

Without a formal will, the general rule for inheritance distribution starts with a surviving spouse and children (who often share the estate), followed by grandchildren, parents, siblings, nephews and nieces, grandparents, then other extended relatives such as aunts, uncles and cousins. The exact order varies by state. Note that ex-spouses, and in most states stepchildren, receive nothing under standard state inheritance laws; they must be specified in a will or trust document, or named as an account beneficiary, to receive any consideration.

This means that, without a will or close family heir, your assets could go to an estranged sibling or even a cousin you’ve never met. If you have absolutely no family left when you pass on, the proceeds generally go to the state through a process called escheat (this includes funds from physical assets that are auctioned off).

Start with Living Matters

Before you start allocating where your assets go after your death, first complete paperwork assigning people to manage your assets if you ever become incapacitated while still alive. The key documents include:

• Durable Power of Attorney (DPOA) – this document names an agent, such as a trusted friend, attorney, or bank trust department, to take over managing your financial and legal affairs if you are deemed unable.
• Health Care Directive – authorizes someone to make medical decisions on your behalf when you are unable.
• Living Will – details what life-saving procedures and treatments you would and would not like to receive in order to keep you alive. Separately, a DNR (do not resuscitate) order, signed by your physician, directs medical staff not to perform CPR if your heart or breathing stops.

Choose Your Estate Manager

Your will should assign an executor to manage your estate once you pass away. Again, this can be a friend or a custodian (e.g., bank, attorney, financial advisor). This person is responsible for initiating probate court proceedings and distributing assets as dictated by your will. Responsibilities may include notifying your landlord/lender(s), utility providers, banks, credit card companies, investments, and insurance companies of your passing, as well as managing the sale of any property you own. Most states allow any competent adult to serve as executor, including the attorney who drafted your will, though some states restrict people with felony convictions or those who live out of state.

It behooves the heirless to consider estate planning to better allocate funds toward people or causes they care about, such as friends, coworkers, or charities. For example:

• Animal shelter or humane society
• Local church or other religious institution
• The public library
• The Public Broadcasting Service (PBS)
• A local land trust, the World Wildlife Fund or other conservation organizations
• A favorite city institution, such as a museum, zoo, symphony, ballet or theater
• Scholarship fund for your alma mater – K-12 or university
• YMCA or Jewish community center
• Medical institutions, such as local clinics, St. Jude Children’s Research Hospital, Planned Parenthood, cancer or other disease research
• Charities for children, such as the National Center for Missing & Exploited Children or Children’s Health Fund

If nothing local appeals, browse options at websites such as CharityWatch.org, a website dedicated to assessing how efficiently charities use donations.

Note that retirement accounts and life insurance policies generally request a beneficiary, and many bank and brokerage accounts allow one. You may not even remember that when you opened an account years ago, you listed your boyfriend or wife at the time as your beneficiary, even though that person is now your ex. Be aware that these beneficiary designations supersede any will instructions. These assets pass directly to the named beneficiary outside of probate, without going through your executor. Be sure to check and confirm your beneficiary designations while you are still alive to eliminate this issue. Many states automatically revoke an ex-spouse’s designation after a divorce, but that rule generally does not apply to employer retirement plans such as 401(k)s, so an ex could still collect. If no beneficiary is named, the account typically becomes part of your estate and goes through probate.

Charitable Donations

For people with substantial assets who want to leave money to one or more charities, sophisticated philanthropic vehicles include:

• Charitable remainder trust – The money is deposited into a trust while you are still alive. You receive an immediate tax deduction based on the present value of the charity’s future share (the remainder interest) of this irrevocable trust, as well as an income stream from the trust for life or for a set term of up to 20 years. When the trust ends, whatever charity you designate receives the remaining assets.
• Donor-advised funds – You make an irrevocable, tax-deductible contribution of cash, securities, or appreciated noncash assets to a fund, which is professionally managed for future growth. You may recommend money be granted to a qualified 501(c)(3) charity over time, basically leaving a legacy that continues to give.
• Private foundations – You can actually start your own charitable organization with an initial tax-deductible gift and appoint a board of directors or trustees (who may receive reasonable compensation) to manage and distribute assets according to your wishes. Foundations can make grants beyond public charities in limited cases, but only under strict IRS rules. They must also distribute at least 5 percent of their assets each year and pay an excise tax on investment income, and donors face lower deduction limits than for gifts to public charities.

It is best to consult with a financial advisor, tax professional, or estate planning attorney with experience in setting up a sophisticated charitable giving plan to make the most of your contributions.