RMDs After Pension Rollover: What Your IRA Distributions Will Look Like (2026)

When you take your pension as a monthly annuity, the required minimum distribution rules don't apply — the pension simply pays you every month, automatically satisfying any IRS distribution obligation. But when you roll the lump sum into a traditional IRA, the IRS becomes your pension administrator: you must begin taking required minimum distributions at a government-set schedule regardless of whether you need the money. For an $800,000 rollover, that RMD obligation in the first year is roughly $30,000–$33,000, taxable as ordinary income, with no ability to skip it. Understanding how RMDs work — and how to manage them — is one of the most consequential long-term decisions that follows a pension rollover.

Why rolling to an IRA creates an RMD obligation

A traditional pension annuity is not subject to the RMD rules in any meaningful sense — the plan simply distributes your benefit monthly, and the IRS is satisfied. The RMD rules (IRC §401(a)(9)) were designed specifically to prevent taxpayers from using tax-deferred accounts as indefinite wealth-accumulation vehicles. Once your pension lump sum becomes a traditional IRA, that money is pooled with every other traditional IRA dollar you hold, and the IRS requires you to begin drawing it down once you reach RMD age — whether you need it or not.¹

The practical consequence: if you roll a $900,000 pension at age 62 and earn 5% annually for 11 years, your IRA is worth roughly $1.54 million when your first RMD hits at age 73. Your first required withdrawal is approximately $58,000 — taxable income you may not need, potentially pushing you into a higher bracket and triggering IRMAA Medicare surcharges.

This isn't a reason not to roll the pension. But it is a reason to plan for RMDs beginning the day you receive the rollover check.

When RMDs start: the SECURE 2.0 ages

SECURE 2.0 (§107) raised the RMD starting age and created two tracks based on birth year:¹

How to calculate your RMD

The formula is straightforward:²

RMD = Prior December 31 account balance ÷ IRS Uniform Lifetime Table divisor for your age

The "prior December 31 balance" is the total value of all your traditional IRA accounts (including SEP and SIMPLE IRAs) as of December 31 of the previous year. If you rolled your pension and have other traditional IRAs, they are all aggregated. You may take the combined RMD from any one account or split it across accounts — but the total must meet the aggregate minimum.

The divisor comes from the IRS Uniform Lifetime Table (Table III in Publication 590-B), updated in 2022 to reflect longer life expectancies. These factors have not changed since the 2022 revision.

Uniform Lifetime Table — key ages

Source: IRS Publication 590-B, Appendix B, Table III (Uniform Lifetime). Divisors updated by T.D. 9930, effective for distributions beginning in 2022.

Worked example: $800K pension rolled at age 62

Consider a Boeing engineer who retires at 62 with an $800,000 pension lump sum. She rolls it to a traditional IRA and earns an average of 5% annually. She has no other IRA balances. She was born in 1963, so her RMD start age is 75.

Assumes 5% annual return, no additional contributions. Actual balances will vary. Illustration only.

The RMDs here are substantial — and fully taxable as ordinary income each year. Compare that to the original alternative: taking the pension as a $3,900/month joint-and-survivor annuity, which would deliver $46,800/year, also fully taxable. The RMD path produces more taxable income than the annuity would have, driven by investment growth. That's a tax management challenge the annuity path doesn't create.

Annuity vs. IRA: the RMD comparison

This is the dimension of the lump-sum decision most people overlook. If you take the pension as an annuity:

• Monthly payment is fixed (usually) and fully taxable as ordinary income
• No RMD calculations, no annual IRS compliance
• Payment continues for life (or the period certain/survivor period chosen)
• Income is predictable; no investment return needed

If you roll to an IRA:

• Taxable income in early years is zero (you're letting the account grow)
• Starting at age 73 or 75, RMDs create mandatory taxable income whether you need it or not
• RMD amounts grow over time as the account grows, creating an increasing tax burden in your 80s
• If you die with a large balance, heirs face a 10-year distribution window under the SECURE Act

Strategy 1: Roth conversion window (ages 60–72)

The most powerful RMD management tool is converting traditional IRA dollars to Roth before RMDs begin. Every dollar converted to Roth is permanently removed from the RMD base — Roth IRAs have no required minimum distributions during the owner's lifetime.¹

The "conversion window" is the period after you stop working (and have relatively low income) but before RMDs start. For someone who retires at 62 and has an RMD start age of 75, that window is 13 years. Converting $50,000–$100,000 per year during that window, targeting the top of the 22% or 24% bracket, can dramatically reduce the RMD base.

Conversion window example

Using the same engineer: she rolls $800K at 62. If she converts $60,000/year from age 62 to 74 (13 years), she converts approximately $780,000 at an average 22% federal rate. Her traditional IRA at 75 is roughly $540,000 instead of $1.32 million — cutting her first RMD from ~$53,700 to ~$22,000. Her Roth IRA of ~$780,000 (plus growth) is completely RMD-free.

The tradeoff: she pays tax during the conversion years. Whether this is favorable depends on her bracket during conversion vs. her bracket during RMD years. If she'd be in the 22% bracket either way, the timing doesn't change much. If RMDs would push her into 24–32%, converting at 22% now saves meaningfully.

Also see: the OBBBA super catch-up for ages 60–63 (up to $11,250 additional 401(k) contribution) doesn't affect IRA RMDs but is worth noting if you have an active employer plan alongside the rollover IRA.

Strategy 2: QLAC — defer RMDs on up to $210,000

A Qualified Longevity Annuity Contract (QLAC) is a specific type of deferred annuity you can purchase inside your IRA. The amount used to buy the QLAC is excluded from your RMD calculation until the annuity begins paying out (which can be as late as age 85). SECURE 2.0 expanded QLAC rules significantly:³

• 2026 QLAC limit: $210,000 per person (indexed for inflation from the $200,000 SECURE 2.0 base; per IRS Notice 2025-67)
• Married couples: each spouse can hold $210,000 in their own IRA, up to $420,000 combined
• The 25%-of-IRA-balance cap was eliminated by SECURE 2.0 (formerly capped QLAC purchases to 25% of account value)
• QLAC payments must begin by age 85
• QLAC is excluded from your Dec 31 IRA balance when calculating annual RMDs

QLAC illustration

Same engineer with $1.32M IRA at 75. She purchases a $210,000 QLAC at age 72. Her RMD-eligible IRA balance at 75 is approximately $1.11M instead of $1.32M — her RMD drops from ~$53,700 to ~$45,100. She defers the $210,000 QLAC balance entirely until the QLAC begins paying at 85. At that point she receives a predictable monthly payment guaranteed for life — functioning as longevity insurance for her 85+ years.

QLACs are not right for everyone: they are illiquid, the money is committed to the insurance company, and if she dies before 85 the QLAC principal is typically forfeited (some contracts offer return-of-premium riders at additional cost). But for someone with a large IRA who primarily wants to reduce near-term RMD pressure and ensure income at very advanced ages, they are a purpose-built tool.

Strategy 3: Qualified charitable distributions ($111,000 limit)

If you are age 70½ or older and charitably inclined, a Qualified Charitable Distribution (QCD) lets you transfer up to $111,000 directly from your IRA to a qualifying charity in 2026 — and that transfer counts toward your RMD without being included in your gross income.⁴

The tax math: an $111,000 QCD eliminates $111,000 of otherwise-taxable income. For a retiree in the 22% federal bracket, that's $24,420 in federal tax avoided. Because the QCD doesn't appear in gross income at all, it also doesn't increase provisional income for Social Security taxability, and doesn't affect IRMAA.

Requirements:

• You must be age 70½ or older at the time of the distribution
• Must go directly from IRA custodian to the charity (not to you and then forwarded)
• Must be a qualifying public charity — not a donor-advised fund, private foundation, or supporting organization
• Combined IRA-to-charity transfers cannot exceed $111,000 in 2026 (married couples: $111,000 each from their own IRAs)
• QCDs come first from pre-tax IRA dollars (so no double-dipping: you can't deduct a QCD as a charitable contribution)

IRMAA and the RMD spiral

Medicare Part B and Part D premiums are surcharge-adjusted based on prior-year MAGI (IRMAA). A large pension rollover IRA can create a compounding IRMAA problem in RMD years that the annuity path avoids:

• Annuity path: your pension income is fixed. IRMAA is determined once and stays stable year-over-year (absent other income changes).
• IRA rollover path: RMDs grow annually as the account grows (until the divisor shrinks it back down). Each year's RMD is two years prior income for IRMAA purposes. A retiree whose IRA grows substantially before age 75 may face escalating IRMAA surcharges throughout their 70s and 80s.

The 2026 IRMAA thresholds (first tier triggers at $106,000 single / $212,000 married, adding $69/month per person to Medicare costs) are detailed in the Pension Income & Medicare IRMAA Guide. IRMAA's two-year lookback means RMDs taken today affect premiums in two years — planning well before the threshold is critical.

Social Security provisional income and RMDs

RMDs count in full toward provisional income — the formula that determines how much of your Social Security benefit is taxable:⁵

Provisional income = AGI (excluding SS) + tax-exempt interest + 50% of Social Security

The upper threshold for 85% Social Security taxability is $34,000 (single) / $44,000 (married). Any retiree with a meaningful RMD almost certainly blows through these thresholds, triggering 85% SS taxability automatically. The thresholds haven't been indexed since 1993 — they were designed to affect high earners but now capture most middle-income retirees.

This doesn't mean you should avoid the rollover — it means you should model the full 20-year tax trajectory, not just year one.

What the penalty is for missing an RMD

SECURE 2.0 reduced the RMD excise tax from 50% to 25% of the amount not distributed. If you catch the error and take the distribution within the correction window, the penalty drops further to 10%.¹ The IRS can also waive the penalty for good-cause failures in certain circumstances (e.g., first-time mistakes, taxpayer illness).

The practical message: missing an RMD is not catastrophic, but the cost of remediation is real. Set up automatic RMD calculations with your IRA custodian — every major custodian (Fidelity, Schwab, Vanguard) offers a free RMD calculation and automatic distribution service. Use it.

Annuity inside the IRA: a middle path

One option some retirees overlook: you can purchase an annuity inside your IRA. This converts part of your traditional IRA into a guaranteed income stream, satisfying the RMD obligation for the annuitized portion automatically (annuity payments from a qualified annuity count as RMDs). This isn't the same as the QLAC (which specifically defers income to avoid RMDs); this is simply using a portion of the IRA to create a predictable payment floor while keeping the rest invested.

The appeal: you get some of the predictability of the original pension annuity without having had to make the decision at the moment of rollover. The downside: you give up liquidity and flexibility on the annuitized portion, and income annuity pricing at time of purchase depends on interest rates and your age.

Decision framework: should RMDs change the rollover choice?

RMDs are a reason to plan, not a reason to reflexively avoid the rollover. They favor taking the annuity when:

• The pension annuity offer is generous relative to market interest rates
• You don't need investment growth (e.g., other assets are sufficient)
• You are in a high tax bracket and the RMD income would push you higher
• Simplicity and predictability are important to you

RMDs are manageable — and the rollover likely still wins — when:

• The lump sum is large relative to the annuity (high implied yield on the annuity offer makes the annuity look better; low implied yield makes the rollover better)
• You plan a Roth conversion window that significantly reduces the pre-RMD balance
• You have charitable giving goals and can use QCDs to absorb RMDs tax-free
• Your IRA balance will be passed to heirs who are in a lower tax bracket (10-year distribution window applies, but if heirs are in the 22% bracket vs. your 32%, the shift still benefits the family unit)

Sources

1. IRS — Retirement Topics: Required Minimum Distributions (RMDs). Primary IRS guidance on RMD rules, SECURE 2.0 age changes (73 for 1951–1959 births, 75 for 1960+), RMD aggregation across traditional IRA accounts, Roth IRA lifetime RMD exemption, and reduced excise tax under SECURE 2.0. The authoritative source for IRC §401(a)(9) application.
2. IRS Publication 590-B — Distributions from Individual Retirement Arrangements. Contains the complete Uniform Lifetime Table (Table III), Single Life Expectancy Table, and calculation mechanics for annual RMDs. Table updated by T.D. 9930, effective for distributions beginning January 1, 2022 and unchanged since. Divisors used in this guide: age 73 = 26.5; age 75 = 24.6; age 80 = 20.2; age 85 = 16.0.
3. IRS Notice 2025-67 — 2026 Retirement Plan Cost-of-Living Adjustments. Official IRS release of 2026 qualified plan limits including QLAC dollar limit of $210,000 (indexed from $200,000 SECURE 2.0 base, rounded per IRC §415(d) rules). Also confirms 2026 QCD limit at $111,000.
4. IRS — Qualified Charitable Distributions: Reminder for Retirees Age 70½ and Over. IRS guidance on QCD eligibility requirements (age 70½+), the 2026 $111,000 annual limit, direct-custodian-to-charity transfer requirement, exclusion from gross income, and interaction with the charitable deduction rules (no double-dipping).
5. SSA.gov — Income Taxes and Your Social Security Benefits. SSA official explanation of provisional income formula, $25,000/$34,000 (single) and $32,000/$44,000 (MFJ) taxability thresholds, and the 50%/85% taxability tiers. Confirms thresholds are not inflation-adjusted — the reason nearly all pension and RMD income triggers 85% SS taxability automatically.

RMD ages, divisors, QLAC limit ($210,000), and QCD limit ($111,000) verified against 2026 IRS sources (Notice 2025-67, Pub 590-B). Tax law changes frequently — confirm current values with your IRA custodian or a CPA. Values current as of May 2026.