What If My IRA Keeps Growing Even After RMDs Start?

You finally reach the age when required minimum distributions apply.

Money starts coming out of your traditional IRA every year.

So you assume the account will slowly get smaller.

Then something strange happens.

You take the RMD.

The investments have a good year.

You look at the balance later and think:

“Wait. I took money out. Why is there still this much money in here?”

For retirees with large traditional IRAs, that’s an important question.

Taking RMDs doesn’t guarantee your IRA will shrink quickly.

If investment growth and other account activity outpace the money leaving the account, the balance can potentially remain high or even increase.

That sounds like a good problem.

And financially, growth is usually something people want.

But inside a large tax-deferred IRA, continued growth can also create another question:

“What could this mean for future RMDs and taxable income?”

Quick Answer: Can an IRA Keep Growing While You Take RMDs?

Yes.

An RMD is a required withdrawal.

It isn’t a rule requiring your traditional IRA balance to fall by a specific amount every year.

Your ending account value is affected by several things, including:

• Investment gains or losses
• RMD withdrawals
• Additional withdrawals
• Fees and expenses
• Roth conversions
• Other account activity

If the account earns more than the amount leaving it during a particular period, the balance can potentially increase.

RMD does not mean “required account depletion.”

A Simple Example

Imagine you begin the year with $1 million in a traditional IRA.

For a simple hypothetical example, suppose $40,000 leaves the account during the year for an RMD.

Now suppose the account experiences $80,000 of investment growth before accounting for other activity, fees, or market movement.

You took $40,000 out.

But the hypothetical investment growth was $80,000.

That means the account could still finish higher than where it started, all else equal.

You distributed money and still ended up with a larger tax-deferred balance.

This example is purely illustrative. Actual investment results can be positive or negative and aren’t guaranteed.

Why Can This Become a Tax Planning Issue?

Because future RMDs are tied to applicable account values and IRS distribution factors.

If a large traditional IRA remains large, future required distributions may also remain substantial.

And those distributions can create taxable income.

Now your retirement tax problem may start looking like this:

Large traditional IRA → RMD → continued tax-deferred balance → future RMD → additional taxable income.

The problem isn’t that your money grew.

The problem is that you may have less control over when some of that tax-deferred money becomes taxable income.

“But Isn’t a Growing IRA a Good Thing?”

Of course growth can be good.

I don’t want less money just to create a smaller tax bill.

That’s missing the point.

The question isn’t:

“How do we stop my IRA from growing?”

The question is:

“Where do I want that growth occurring, and what could the tax consequences look like when I eventually use or transfer the money?”

That’s a much better retirement question.

The Account Balance Isn’t the Same as Spendable Money

Suppose your traditional IRA reaches $1.5 million.

It’s easy to look at the statement and think:

“We have $1.5 million.”

You do have a $1.5 million account balance.

But distributions of untaxed traditional IRA money generally create taxable income.

So the number on the statement isn’t automatically the same as the amount available to spend after taxes.

Account value and after-tax spending value are two different numbers.

What If You Don’t Need the RMD?

This is where the problem becomes obvious for some retirees.

Imagine Social Security and pension income already cover most of your lifestyle.

The RMD arrives.

You don’t need it.

You pay the applicable taxes.

Then you move what’s left into savings or a taxable brokerage account.

Next year, another RMD arrives.

Again, you don’t need it.

You think:

“Why am I being forced to create taxable income from money I wasn’t planning to spend?”

That’s a legitimate planning concern.

If You Don’t Need Your RMDs, Who Is the IRA Really For?

This is one of my favorite questions to ask.

If you have a $1 million or $2 million traditional IRA and your retirement lifestyle doesn’t require most of it, then some of that account may not really be retirement spending money anymore.

It may be:

Future surviving-spouse money.

Or:

Legacy money.

If that’s true, the analysis should change.

We’re no longer asking only:

“How do you withdraw this money?”

We’re also asking:

“What’s the most effective way to own and eventually transfer money you may never personally spend?”

Could Roth Conversion Planning Change the Future RMD Picture?

Potentially.

A Roth conversion moves eligible assets from a traditional retirement account into a Roth IRA.

The taxable portion of the conversion generally creates taxable income in the conversion year.

But the amount converted is no longer sitting in the traditional IRA.

That can change the traditional account balance used in future RMD calculations compared with leaving those same assets there.

Roth conversion → smaller traditional IRA than otherwise → potentially smaller future RMDs.

But don’t stop there.

You had to pay taxes to make that conversion.

The future RMD reduction has to earn the conversion tax.

Don’t Convert Just Because Your IRA Is Growing

This is important.

A growing IRA doesn’t automatically mean you should convert it.

Maybe the conversion tax is too expensive.

Maybe the timing is poor.

Maybe Medicare IRMAA changes the economics.

Maybe your expected withdrawals make leaving the money traditional more attractive.

Maybe the no-conversion strategy simply produces a stronger modeled result.

The Roth conversion needs to beat doing nothing.

Our Roth Blueprint Software Can Model Thousands of Potential Scenarios

This is why we use our Roth Blueprint software.

Let’s say you have $1.5 million in a traditional IRA.

RMDs are happening.

The account is still substantial.

I don’t want to say:

“You should convert $200,000.”

Why $200,000?

Why this year?

Why not $75,000?

Why not $300,000?

Why not leave it alone?

Instead, Roth Blueprint can assess thousands of potential modeled scenarios involving different:

• Traditional IRA values
• Conversion amounts
• Conversion starting years
• Conversion periods
• Tax-bracket targets
• Projected conversion taxes
• Projected RMDs
• Roth balances
• Social Security income
• Pension income
• Potential Medicare IRMAA
• Retirement-income outcomes
• Surviving-spouse outcomes
• Legacy outcomes

If we’re going to voluntarily pay a large tax bill, I want the strategy to prove why.

Example: Leave the IRA Alone or Convert Part of It?

Imagine you’re retired with $1.5 million in a traditional IRA.

Your RMDs have started.

Your lifestyle is largely covered by Social Security and other income.

Now Roth Blueprint compares two broad paths.

Strategy A: Leave the IRA Traditional

You continue taking required distributions.

The remaining assets stay tax-deferred.

Future account values and RMDs rise or fall with actual investment results, withdrawals, and other activity.

Strategy B: Partial Roth Conversions

You take the applicable RMD.

Then you convert additional eligible traditional IRA assets.

You pay taxes on the taxable conversion amount.

The traditional IRA balance is lower than it otherwise would have been.

The Roth balance is higher than it otherwise would have been.

Future projected RMDs may change.

Now we compare the complete result.

What Should We Compare?

Not just taxes this year.

I want to compare:

• Total projected conversion taxes
• Future projected RMDs
• Traditional IRA values
• Roth IRA values
• Potential Medicare IRMAA
• Social Security taxation
• Projected retirement income
• Personal liquidity
• Surviving-spouse outcomes
• Legacy outcomes

A Roth conversion isn’t good because it reduces RMDs. It’s good only if the value created is strong enough to justify what you gave up to get there.

What If the IRA Grows Faster Than the RMD Comes Out?

This is the scenario that surprises people.

Imagine your traditional IRA earns a hypothetical 7% during a year.

Your RMD and other withdrawals amount to less than the investment growth.

The account may still finish the year higher.

Now repeat that possibility across multiple years.

Your RMD percentage changes as you age, markets don’t return the same amount every year, and account values move around.

But the central issue remains:

Taking distributions doesn’t guarantee the tax-deferred balance disappears quickly.

A Bigger IRA Can Mean Bigger Future RMDs

If the relevant year-end traditional IRA value rises, the next RMD calculation may start from a larger balance than it otherwise would have.

That can produce a larger required distribution, all else equal.

A larger RMD can create more taxable income.

More income can interact with:

• Federal income-tax brackets
• Social Security taxation
• Medicare IRMAA
• Investment income
• Other retirement-income sources

The RMD isn’t living in isolation. It lands on the same tax return as everything else.

How Does Medicare IRMAA Fit Into This?

If larger RMDs increase modified adjusted gross income, Medicare IRMAA may become part of the conversation.

Then a Roth conversion can also create taxable income in the conversion year.

So you have a tradeoff.

A conversion may create higher income now.

But reducing the traditional IRA may change future RMD income.

Don’t optimize only for this year’s Medicare premium.

And don’t ignore Medicare either.

Put it in the model.

Could Paying More Medicare Now Still Make Sense?

Potentially.

Suppose one modeled Roth conversion creates additional Medicare IRMAA costs.

That’s a real cost.

But suppose the same strategy creates a much stronger projected long-term outcome after accounting for taxes, RMDs, retirement income, and legacy.

Then the Medicare cost may be worth accepting.

Or maybe IRMAA wipes out too much of the benefit.

Either way, make IRMAA compete against the rest of the retirement math.

What About Social Security?

RMD income can interact with Social Security taxation.

Roth conversion income can too.

That means creating conversion income now may increase taxable income during the conversion years.

But reducing future traditional account balances may create a different taxable-income pattern later.

We’re moving taxes through time, not making them disappear by magic.

What Happens When One Spouse Dies?

This is where a large traditional IRA can become even more important.

Imagine you and your spouse are both retired.

You have a large traditional IRA.

RMDs are manageable while you’re both alive.

Then one spouse dies.

The surviving spouse may still have most of the retirement assets.

But eventually, the tax filing status changes.

Some household income may disappear.

Many expenses don’t get cut in half.

And the traditional IRA may still be large.

The account didn’t become smaller just because the household did.

A Growing IRA Can Become a Surviving-Spouse Tax Problem

Suppose the traditional IRA continues growing while RMDs are being taken.

Then one spouse dies.

The surviving spouse now controls a substantial tax-deferred account.

Future required distributions may create taxable income on a different tax return than the couple had while both spouses were alive.

This is one reason Roth conversion modeling shouldn’t stop at:

“What saves us taxes this year?”

I also want to see:

“What happens if one of you is doing this alone?”

If Your IRA Is Growing and You Don’t Need It, Legacy Becomes a Bigger Issue

Let’s say you’re 75.

Your IRA is still $1.5 million.

You don’t need most of the RMD for spending.

At some point you have to acknowledge:

“We’re probably leaving a lot of this money to the kids.”

Now we need to evaluate the beneficiary outcome.

Traditional IRA distributions received by beneficiaries can create taxable income.

Inherited Roth IRAs have their own distribution requirements under current federal rules, but qualified Roth distributions generally receive different income-tax treatment.

The question isn’t just how big the inheritance is. It’s what kind of account they’re inheriting.

Don’t Forget the 10-Year Rule for Many Non-Spouse Beneficiaries

Under current federal rules, many non-spouse designated beneficiaries who inherit retirement accounts after 2019 are generally subject to a 10-year distribution framework, with exceptions for certain eligible designated beneficiaries.

That can create a very different planning issue for an adult child inheriting a large traditional IRA.

Imagine your child inherits substantial traditional IRA assets while they’re in their peak earning years.

Now inherited retirement distributions may be landing on top of:

• Salary
• Business income
• Investment income
• A spouse’s income

Your retirement tax problem may eventually become their tax problem.

Does That Mean You Should Convert Everything for the Kids?

No.

Your retirement comes first.

Maybe converting everything creates too large a tax bill.

Maybe it drains too much cash.

Maybe the projected legacy isn’t actually stronger after the conversion cost.

A Roth conversion for legacy purposes still has to prove itself with the math.

How Much Should You Convert If the IRA Keeps Growing?

There isn’t a universal percentage.

Don’t automatically convert:

10%.

20%.

$100,000.

$250,000.

Instead, we can ask:

“What tax bracket are we trying to target, and how much conversion income can the model accommodate around that target?”

Then compare that result with other bracket targets and conversion amounts.

The tax bracket is something we can target in the modeling. The math still has to tell us which target makes sense to consider.

Could a Higher-Bracket Conversion Still Win?

Yes.

Maybe a smaller conversion keeps you around a lower marginal tax bracket.

But the traditional IRA remains substantially larger.

Another modeled strategy converts more and creates some income at a higher marginal rate.

But it may also materially change future RMDs, Roth balances, surviving-spouse outcomes, or legacy.

Paying the lowest possible tax rate today isn’t automatically the same thing as producing the strongest long-term result.

How Do You Pay Taxes on the Conversion?

Suppose Roth Blueprint shows that a conversion is worth considering.

Now the next question is:

“Where does the money for the conversion tax come from?”

You may evaluate several approaches.

Option 1: Personal Savings

You use outside cash to address the conversion-tax liability.

That may allow more of the converted retirement assets to remain inside the Roth.

But it reduces your personal liquidity.

Option 2: Retirement Assets

You may evaluate retirement assets as part of the tax-payment strategy.

That can preserve more outside cash.

But it may reduce the amount ultimately remaining in the retirement strategy and can change the tax outcome.

Option 3: Contractual Carrier Bonus Value

When suitable, certain annuity contracts may provide contractual carrier bonus value.

That value can be included in the economic analysis.

In some modeled strategies, contractual carrier bonus value may economically offset some or potentially all of the conversion-tax cost over the strategy period.

That may preserve more personal cash from an overall economic standpoint.

The insurance carrier doesn’t assume your IRS tax liability.

The bonus isn’t an IRS tax credit.

The tax still exists.

We’re evaluating whether contractual carrier value changes the economics of the strategy.

Why Cash Preservation Can Matter More Than You Think

You may have enough savings to pay the conversion taxes.

That’s not the same as wanting to spend those savings.

Maybe that cash is your safety net.

You think:

“If something happens, that’s the money I can get to immediately.”

So a strategy that consumes $100,000 of cash needs to justify that decision too.

For many retirees, liquidity isn’t just money. It’s independence.

The Emotional Contradiction of a Growing IRA

This is the strange part.

You want the IRA to grow.

Of course you do.

Then it grows and you start worrying about the tax consequences.

So you’re simultaneously thinking:

“I want more money.”

and:

“I don’t want this tax-deferred account getting so big that it creates a bigger problem later.”

Both thoughts can be true.

The goal isn’t to stop growth. The goal is to understand the after-tax value of where the growth occurs.

The Fear Behind Changing a Strategy That Has Worked for Decades

Your IRA got this big because you did something right.

You saved.

You invested.

You didn’t panic every time the market moved.

Now someone is talking about converting part of it and voluntarily paying taxes.

Your first reaction may be:

“Why would I mess with something that’s working?”

That’s reasonable.

Then comes the other thought:

“What if leaving it alone is the mistake?”

And underneath all of it:

“What if we mess this up and regret it?”

You don’t want your children cleaning up a financial mess later.

“I don’t want to ask my kids for help.”

You’ve handled your own finances your whole life.

“We should be able to handle this ourselves.”

That’s why I don’t want to replace your current strategy based on fear.

I want the alternative to prove that it’s stronger.

The Retirement Math Method™

This is why we use our Retirement Math Method™.

We don’t start by saying:

“Your IRA is too big. You need to convert it.”

We start with:

“What happens if you leave it alone?”

Then our Roth Blueprint software can assess thousands of potential modeled scenarios.

We can compare:

• No Roth conversion
• Different traditional IRA growth assumptions
• Different conversion amounts
• Different conversion timelines
• Different tax-bracket targets
• Current and projected RMDs
• Projected conversion taxes
• Potential Medicare IRMAA
• Social Security taxation
• Traditional IRA balances
• Roth balances
• Different approaches to addressing conversion taxes
• Personal liquidity
• Projected retirement income
• Surviving-spouse outcomes
• Legacy outcomes

Then we ask:

“If the traditional IRA keeps growing, is there a mathematically stronger way to position some of those assets?”

Maybe there is.

Maybe leaving everything exactly where it is produces the stronger modeled result.

Either answer is valuable.

I don’t try to sell you on the strategy. I make the strategy prove itself with the math.

Frequently Asked Questions About IRA Growth and RMDs

Can my traditional IRA keep growing after RMDs start?

Yes. Taking an RMD doesn’t guarantee the IRA balance will decline. Investment results, withdrawals, fees, Roth conversions, and other account activity can cause the account value to increase or decrease.

Why would my IRA grow if I’m taking money out?

If investment gains during a period exceed the amount leaving the account, all else equal, the account can finish the period with a higher balance. Actual investment returns can also be negative, so growth isn’t guaranteed.

Can my RMD increase if my IRA keeps growing?

Future RMD calculations use applicable prior year-end account values and IRS distribution factors. A higher relevant account value can produce a larger required distribution than a lower balance would, all else equal.

Does taking an RMD reduce next year’s RMD?

The distribution reduces the account compared with a scenario where that money remained invested, but the next RMD also reflects the applicable year-end account value and IRS distribution factor. Investment performance and other account activity can materially affect that balance.

Can Roth conversions reduce future RMDs?

Converting eligible traditional IRA assets reduces the amount remaining in the traditional IRA compared with leaving those same assets there. That can reduce projected future RMDs from that account.

Do Roth IRA owners have RMDs?

Under current federal rules, original Roth IRA owners aren’t required to take lifetime RMDs from their Roth IRAs. Beneficiaries are subject to separate distribution rules after the owner’s death.

Should I convert my IRA just because my RMDs are growing?

No. Growing RMDs may be a reason to model a Roth conversion, but the projected benefit needs to be compared with conversion taxes, Medicare effects, Social Security taxation, liquidity, retirement income, surviving-spouse outcomes, and legacy.

What if I don’t need my RMD?

If RMDs exceed your spending needs, it may be worth evaluating whether part of the traditional IRA is effectively surviving-spouse or legacy money and whether another tax structure produces a stronger modeled result.

Can I reinvest an RMD I don’t spend?

After satisfying the RMD and applicable taxes, money you don’t spend may generally be invested in an appropriate non-retirement account, subject to normal eligibility, tax, investment, and account rules. The RMD itself cannot simply remain in the traditional IRA as though it had not been distributed.

Can I convert additional IRA money after taking my RMD?

Yes. After the applicable RMD is addressed, additional eligible traditional IRA assets may be evaluated for Roth conversion. The RMD itself isn’t eligible for conversion.

Can Roth Blueprint model future IRA growth and RMDs?

Our Roth Blueprint process can assess thousands of potential modeled scenarios using assumptions about account values, conversion amounts, conversion periods, tax-bracket targets, RMDs, Medicare, Social Security, retirement income, and other factors.

What if the Roth conversion creates Medicare IRMAA?

Potential IRMAA costs should be included in the analysis. A conversion that increases Medicare costs may still produce a stronger projected overall result, or the additional costs may weaken the conversion enough that another strategy looks better.

Can a Roth conversion help my surviving spouse?

Converting traditional assets changes the mix of traditional and Roth assets that may eventually be available to a surviving spouse. That can change projected RMDs and taxable retirement income compared with leaving the same assets traditional.

Can a Roth conversion help my children inherit money more tax efficiently?

A conversion can change the income-tax characteristics of inherited retirement assets. The conversion tax paid today, beneficiary distribution rules, projected account values, and the beneficiaries’ potential tax circumstances should all be considered before making a legacy-driven conversion.

Can a carrier bonus help with Roth conversion taxes?

When suitable, certain annuity contracts may provide contractual carrier bonus value that can be modeled against some or potentially all of the conversion-tax cost over the strategy period. The carrier doesn’t assume the client’s IRS tax liability, and the bonus isn’t an IRS tax credit.

A Growing IRA Isn’t the Problem. An Unexamined Tax Strategy Is.

I don’t want your IRA to perform poorly just so you can have smaller RMDs.

I want your retirement assets working for you.

But if the account continues growing, I also want you to understand what that could mean.

More traditional IRA money.

Potentially larger future RMDs.

Potentially more taxable income.

Potential Medicare consequences.

A surviving spouse who may inherit the problem.

Children who may eventually inherit tax-deferred assets.

Then we compare that path with the alternatives.

Don’t punish the growth. Plan for the tax consequences of the growth.

Want to See What Happens If Your IRA Keeps Growing?

If you have $500,000 or more in IRAs, 401(k)s, or other tax-deferred retirement assets, we can model what your current path may look like and compare it with potential Roth conversion strategies.

Using our Roth Blueprint software and Retirement Math Method™, we can assess thousands of potential scenarios.

No conversion.

Different conversion amounts.

Different multi-year conversion timelines.

Different tax-bracket targets.

Traditional IRA growth assumptions.

Projected RMDs.

Potential Medicare IRMAA.

Social Security.

Retirement income.

Liquidity.

Your surviving spouse.

Your legacy.

And different approaches to the conversion-tax cost.

You see what happens if the IRA keeps growing.

You see what happens if part of it is converted.

You see the projected taxes.

You see the tradeoffs.

Then you decide.

We don’t sell you a retirement strategy. We run the math and let you decide.

Schedule Your No-Pressure Retirement Strategy Appointment

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  How Does a Roth Conversion Affect Required Minimum Distributions?
  
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  Roth Conversion for Legacy Planning: What Happens to Your IRA When Your Kids Inherit It?
  

Important Disclosure

This article is for educational purposes only and isn’t intended as individualized tax, legal, investment, accounting, insurance, Social Security, Medicare, or retirement-planning advice. Examples involving IRA balances, investment growth, RMDs, taxes, and other financial values are hypothetical and aren’t guarantees of future results. Investment values can increase or decrease, and past or assumed performance doesn’t guarantee future performance. Required minimum distribution rules can vary based on birth year, account type, beneficiary status, and applicable federal law. Roth conversions can create significant taxable income and may affect tax brackets, Medicare premiums, Social Security taxation, future RMDs, liquidity, beneficiary outcomes, and other parts of your financial situation. Roth Blueprint calculations and other projections are based on assumptions and information entered into the analysis and cannot guarantee a particular tax result, investment result, future account value, retirement-income result, RMD reduction, legacy result, or future product performance. Insurance and annuity products may contain fees, charges, surrender periods, liquidity restrictions, eligibility requirements, bonus provisions, participation rates, caps, spreads, and other contractual terms. A carrier bonus isn’t an IRS tax credit and doesn’t transfer the client’s tax liability to an insurance company. Statements that contractual carrier bonus value may economically offset some or potentially all of a modeled conversion-tax cost aren’t statements that the tax disappears or that the carrier directly pays the client’s tax liability. Actual results can vary. Before implementing a Roth conversion, RMD, annuity, investment, withdrawal, or legacy strategy, consider working with qualified financial, insurance, tax, and legal professionals who can evaluate your individual circumstances.