Craig Wear, CFP®Craig Wear, CFP® | Expert in Roth Conversions & Tax-Efficient Retirement Strategies for IRA Millionaires

This RMD Tax Trap Costs You MILLIONS

4 Mar 2026 · 1 min

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In this concise explanatory video, Craig Wear, CFP® outlines how Required Minimum Distributions (RMDs) from traditional IRAs are not static but increase each year as a retiree ages. He explains that the IRS uses a life‑expectancy table to set a withdrawal percentage that rises from about 3.8% at age 73 to over 5% in the early 80s and can exceed 8% in the late 80s. Because RMDs are taxable, a larger balance and higher withdrawal percentage mean higher tax bills. Wear highlights the counter‑intuitive trap: the better an IRA’s investment performance, the larger the RMDs become, which ultimately inflates the lifetime tax liability, potentially costing millions over a long retirement.

Chapters

RMDs don't stay constant or flat. They increase every single year for the rest of your life. The IRS uses a life expectancy table, and it looks complicated, but the concept is pretty simple. Each year, the percentage you must draw gets larger. At age 73, it's roughly 3.8% of your balance. By your 80s, it's over 5%, and by your late 80s, it can exceed 8% of your total balance that is forced out of the account in distributions. And the longer you live, the more aggressively the IRS forces your IRA onto your tax return. Now, maybe you're thinking, of course I'll pay taxes, this money was tax-deferred, and you're right. But here's the truth. When your IRA grows, your RMD grows, and when your RMD grows, your taxes grow. Ironically, the better your investments perform, the larger your lifetime tax bill becomes. That's the trap.