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Meet Joan. She retired recently after spending 30 years teaching anthropology at a state university. She has also made responsible choices with her money and has paid off her house while building a nest egg worth $600,000.

Much of this money is in a traditional IRA. She also receives a pension of $4,000 a month and Social Security payments of $1,800 a month, after taxes. The combined checks comfortably cover all of her current living expenses, sitting at just about $4,500 per month.

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Earlier this year, Joan learned that Required Minimum Distributions (RMDs) could help her money go further. Now she wants to know how to comply with RMD rules without overpaying in taxes down the line. While she has 12 years before she has to worry about RMDs going into effect, she doesn’t want to drain her nest egg too quickly, as she would like to leave some money to her children when she passes.

Joan also realizes that her nest egg might need to be used for long-term care, the costs of which are high in her state. According to data from CareScout, nursing home care in the U.S. averages $9,581 for a semi-private room or $10,798 for a private room each month — that’s almost $130,000 per year (1). This is completely out of reach for many retirees.

Beyond any planning for long-term care, Joan could also consider how RMDs slot into her retirement. Since much of her nest egg is saved in a traditional IRA, the funds will be subject to RMDs once she reaches age 73.

Here’s what she could do next.

While your golden years can be full of memorable times, the reality of aging is that it comes with increased living expenses. At some point, you may no longer be able to take care of certain tasks on your own, and depending on your family situation, you may have to manage on your own.

Some retirees simply need an extra hand with groceries or household chores. Others may require long-term care with daily support for everyday tasks.

While it’s easy to imagine staying healthy and independent forever, things don’t always play out that way. These costs can hit $2,058 per month for in-home help on average, or $6,200 for an apartment in an assisted living community, based on the same CareScout report.

Joan is relatively young and likely has many independent years ahead of her. But it’s helpful to consider that she may eventually need to outsource some daily living tasks. In fact, according to the Center for Retirement Research at Boston College, 80% of 65-year-olds will need long-term care at some point over their twilight years (2).

One way to mitigate the potential costs of long-term care is to purchase long-term care insurance.

For a single male, the average annual premium purchased at 65 is $1,200. For a single female, like Joan, that same premium is $1,900, according to the American Association for Long-Term Care Insurance (3). If possible, Joan could find a way to pay for this insurance policy — especially given her premium will only increase if she waits longer to purchase.

Since she’s spending less than her income each month, it’s an expense worth considering to safeguard her financial future. Long-term care insurance not only covers your stay in a nursing facility, but can also offset the cost of in-home care, speech or physical therapy, accessibility upgrades to your home for mobility, and potentially the costs of staying in an assisted living facility (4).

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Think of RMDs as the minimum amount an account holder must withdraw after a set age.

Starting at 73, you’ll need to withdraw a set amount each year from accounts such as traditional IRAs, SEP IRAs, SIMPLE IRAs and employer retirement plans, according to the IRS. This is how the IRS makes sure you don’t let your retirement money sit forever. And if you skip your RMD, you will be hit with a 25% tax penalty on the set amount.

This is a more common problem than you might think. Vanguard reported that in 2024, nearly 7% of their IRA investors didn’t take their RMDs, and paid an average $1,100 tax penalty as a result (5).

There are many considerations needed to craft the best strategy to reduce your RMDs. And that can be a crucial financial move, given RMDs are taxed as ordinary income once distributed. That added income can have a profound impact on your financial situation — potentially launching you into a new tax bracket, reducing your deductions or even increasing Medicare premiums.

An optimal process involves understanding multiple tax rules and seemingly unrelated consequences. Because of that, it’s often best to enlist the help of a financial advisor.

An advisor may suggest that Joan minimize her RMDs by lowering the balance of the relevant account. For example, she could pursue a conversion strategy that would pull funds out of her traditional IRA and put them into a Roth IRA, which isn’t subject to RMDs.

In that case, she would still have to pay income taxes on funds she withdraws from her traditional IRA before she tucks them into a Roth IRA.

Alternatively, an advisor may simply tell Joan that she should opt for the simpler path. While she could further optimize her situation through RMDs, the hassle of properly timing conversions and managing her tax consequences may not be worth it, both financially and administratively.

Clearly, RMD strategies are both individual and complex. Finding a financial advisor that suits your specific needs and financial goals is simple with Vanguard.

Vanguard’s hybrid advisory system combines advice from professional advisors and automated portfolio management to make sure your investments are working to achieve your financial goals.

With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built and would like to try to grow their wealth with a variety of different investments. All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.

Another option for Joan, although it would require long-term planning, is to capitalize on the back-door Roth IRA method. This is a strategy that typically applies to those with high net worths.

That’s because Roth IRAs do not have RMDs, so you can grow your money, tax-free, indefinitely. There are RMD rules for Roth IRA beneficiaries though — so make sure you fully understand all of the financial and tax implications before going down this path.

While Roth IRAs don’t allow joint filers making above $246,000 or individuals making more than $165,000 in modified adjusted gross income to make contributions, there’s a workaround. You can instead contribute to a traditional IRA and then convert it into a Roth IRA.

If that sounds complicated — and it is — the experts at Range are here to help. They provide all-in-one white-glove wealth management services for high-earning professionals and wealthy households, including navigating the complexities of the Roth IRA backdoor tax strategy and even the mega-backdoor Roth IRA method.

But Range advisors can also offer proactive advice across your entire financial life, making them a good fit for anyone with a high net worth — not just retirees.

For those more focused on maxing out their IRAs and retirement accounts, you may want to instead consider working with Advisor.com. Their platform connects you with licensed financial professionals in your area who can provide personalized guidance.

This is an ideal service for those looking to get a handle on their finances or quickly double check that their retirement strategy is still on track. Even better, a professional advisor can help you determine how many years you have left to invest before retirement and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio.

And the best part? You can schedule a free, no-obligation consultation to discuss your retirement goals and long-term financial plan, and make sure their pick is the right one for you.

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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

CareScout (1); Center for Retirement Research at Boston College (2); American Association for Long-Term Care Insurance (3); CNBC (4); Vanguard (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.