Saving for retirement in a traditional IRA or 401(k) makes sense for a lot of people. These accounts are funded with pre-tax dollars, allowing you to shield some of your income from the IRS. They also allow your money to grow on a tax-deferred basis.
The problem with traditional retirement accounts is that they don't make it possible to let your money sit and grow indefinitely. Once you turn 73 (or 75, depending on your year of birth), you're forced to take mandatory withdrawals from traditional IRAs and 401(k)s known as required minimum distributions, or RMDs.
Image source: Getty Images.
RMDs aren't a problem when the amount you're forced to withdraw is equal to or less than the amount you were planning to withdraw. In other words, if you need $15,000 a year from your IRA to supplement your Social Security checks and you're on the hook for a $10,000 RMD, that shouldn't be an issue.
Rather, RMDs can be a huge pain when you don't need the money from your IRA or 401(k) but have to take it out anyway to avoid a huge penalty. That's because RMDs can push you into a higher tax bracket and leave you with a gigantic IRS bill.
One retirement account lets you avoid RMDs. But there's a catch you should know about.
The problem with Roth IRAs
Saving for retirement in a Roth IRA is a great way to avoid RMDs. But there are a couple of snags you might hit with a Roth IRA.
First, you don't get an up-front tax break on the money you contribute. If you're a higher earner, losing that tax break during your working years could mean handing a lot of money over to the IRS. And while you could fund a traditional retirement account and do a Roth conversion when your income drops, those can be tricky to time.
Another issue is that not everyone is allowed to contribute to a Roth IRA. The income limits that apply to these accounts change yearly.
For 2026, if you're single and your modified adjusted gross income (MAGI) is $168,000 or higher, you're barred from making Roth IRA contributions. The same applies if you're married filing a joint tax return with a MAGI of $252,000 or more.
If you can't fund a Roth IRA directly, conversions could be an option. But again, conversions aren't the easiest thing to pull off, because any amount you convert counts as taxable income for that year.
Many people who are higher earners assume that they'll have a period before RMDs start when their income declines, making Roth conversions possible. But that's not guaranteed to happen.
Know your options
It's not a given that you'll be subject to RMDs during retirement. With a Roth IRA, you can avoid them completely.
But saving in a Roth IRA isn't as easy as it sounds. It means giving up an immediate tax break on contributions and possibly having to deal with conversions. Rather than solely focus on avoiding RMDs, you may instead want to figure out strategies for minimizing the tax bill associated with them.
