A large traditional IRA can feel like pure wealth. In many ways it is. But it's also a deferred tax liability — one that grows every year alongside the account balance, and that eventually gets collected, one way or another. The question isn't whether the IRS gets their share. The question is how much they get, and whether that outcome was planned or just allowed to happen.
Here are some of the most common and most expensive tax mistakes retirees with large IRAs make — and what the families who get this right tend to do differently.
Mistake 1: Ignoring the RMD Problem Until It Arrives
Required minimum distributions begin at age 73 for most people born between 1951 and 1959. For someone with a $1.5M or $2M traditional IRA, RMDs can easily reach $60,000–$100,000 or more per year — arriving as fully taxable ordinary income on top of Social Security, pension income, and investment returns that are already filling the brackets.
The mistake isn't taking RMDs. The mistake is letting the IRA grow for years without a plan for what those distributions will look like — and then discovering at 73 that the forced income is pushing Medicare premiums up, making Social Security more taxable, and creating a tax bill that proactive Roth conversions five years earlier could have significantly reduced.
The window to address this is before RMDs begin, not after. For a clear picture of how Roth conversion timing interacts with the RMD problem, this piece on the hidden cost of waiting on a Roth conversion shows what the delay actually costs in real dollar terms.
Mistake 2: Converting Too Much in the Wrong Year
Roth conversions are one of the most powerful tools available to retirees with large IRAs — but converting the wrong amount in the wrong year can trigger consequences that offset much of the benefit. Converting into a year with large capital gains. Crossing an IRMAA threshold that increases Medicare premiums two years later. Pushing provisional income above the 85% Social Security taxability threshold. Making a large conversion in a year when state taxes make the cost unusually high.
These aren't reasons to avoid conversions. They're reasons to model them carefully before executing. The amount matters. The year matters. What else is happening in the income picture matters. For context on how the biggest tax mistakes in retirement tend to cluster around exactly these interactions, this piece on the biggest tax mistakes affluent retirees make covers the most common pressure points in depth.
Mistake 3: Not Using QCDs When They're Available
Qualified charitable distributions allow people aged 70½ and older to transfer up to $108,000 per year directly from a traditional IRA to a qualified charity — without that distribution counting as taxable income. For charitably inclined retirees who are also subject to RMDs, this is one of the cleanest planning moves available: the RMD obligation is satisfied, no taxable income is recognized, and the charitable intent is fulfilled.
The mistake is donating from a bank account or writing a check while taking a full taxable RMD from the IRA — paying taxes on the distribution and then getting a deduction that only partially offsets it, or losing the deduction entirely because of the standard deduction threshold. QCDs sidestep all of that. For a deeper look at how charitable giving and tax strategy work together for IRA holders, this overview of maximizing philanthropy while minimizing taxes covers the full range of tools.
Mistake 4: Leaving the Wrong Assets to the Wrong Heirs
Under the SECURE Act, most non-spouse beneficiaries who inherit a traditional IRA are now subject to a 10-year distribution rule — the full account must be distributed within 10 years of the original owner's death. If that beneficiary is a child in their peak earning years, every distribution from the inherited IRA layers on top of their own earned income and gets taxed at their marginal rate.
The wealthiest families think about this deliberately. They ask: which of our heirs is in the lowest tax bracket? Which accounts should go to them? Would our children be better served by inheriting a taxable brokerage account — where the stepped-up basis at death eliminates embedded gains — rather than a traditional IRA where every dollar is taxable? These aren't estate planning questions in isolation. They're investment allocation decisions that need to connect to the estate plan. For a comprehensive look at how inherited IRA rules work under current law, this guide to inheriting a large IRA covers the mechanics and the most common mistakes.
Mistake 5: Treating the IRA in Isolation
Perhaps the most pervasive mistake with large IRAs is managing them as a standalone investment account rather than as one piece of a larger financial system. The IRA interacts with Social Security taxability. It interacts with Medicare premiums. It interacts with the estate plan and the beneficiary designations. It interacts with capital gains from a taxable portfolio in the same year. Decisions made about the IRA without accounting for all of those interactions tend to be suboptimal in ways that are very hard to reverse.
For families with significant IRA balances, the tax planning around the account deserves the same intentionality as the investment management of the account — and it benefits from the same kind of coordinated, year-round attention. For a full picture of the strategies affluent families use to manage this exposure, this overview of how affluent families reduce taxes on large IRAs covers the integrated approach in depth.
What the Families Who Get This Right Have in Common
They aren't necessarily the ones with the largest IRAs or the highest incomes. They're most often the ones with advisors who are looking at the full picture — tax return, RMD projections, estate plan, beneficiary designations, capital gains exposure — and making recommendations before the year closes rather than reporting on what happened after it does.
If you have a large IRA and haven't had a coordinated review of your tax and distribution strategy, we'd welcome the conversation. This is exactly the kind of planning where early action can produce outcomes that simply can't be replicated later.
A large IRA is one of the most valuable assets you can own. It's also one of the most tax-exposed. We work with retirees throughout the St. Louis area to build coordinated Roth conversion, QCD, and estate strategies that can reduce what the IRS ultimately collects.
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John Wahl is a CFP® and ChFC®, co-founder of One Bridge Wealth Management, and was named to the Forbes 2025 Best-In-State Next-Gen Wealth Advisors list. One Bridge is a fee-based independent wealth advisory practice serving high-net-worth families in the St. Louis area. One Bridge Wealth Management acts as a fiduciary when managing assets.
2025 Forbes Top Next-Gen Wealth Advisors, created by SHOOK Research. Presented in Aug 2025; based on 03/31/25 data. Advisors pay a fee to hold out marketing materials. Not indicative of advisor's future performance. Your experience may vary.
This content is for informational purposes only and does not constitute personalized tax or investment advice. Please consult a qualified tax professional regarding your specific situation.