If your parents are in their 70s or 80s and getting crushed by RMD taxes, read this.
I keep getting the same inbound:
“We did everything ‘right’ saving in IRAs… and now the RMDs are killing us.”
RMDs (required minimum distributions) are forced taxable income. You don’t control the timing, and every dollar is taxed as ordinary income.
Most advice stops at:
“Take the RMD, pay the tax, reinvest what’s left.”
That’s lazy.
If you have a decent taxable brokerage account, you can do a lot better:
1️⃣ Use taxable accounts to manufacture deductions
For the right families, you can:
-
Offset ordinary income (RMDs, W‑2, K‑1s)
with tax‑aware hedge funds that pass through ordinary deductions.
-
Offset capital gains
with tax‑aware long/short SMAs that systematically harvest losses.
-
Create tax‑free income
with real estate funds where current yield is sheltered by depreciation.
Done correctly, a large enough deduction (say $500k+) can:
- Wipe out your RMD tax bill and
- Create room for tax‑free Roth conversions in the same year.
2️⃣ Turn ugly IRAs into beautiful Roths (your kids will thank you)
If your kids inherit a traditional IRA, they owe ordinary income tax on it and have to empty it within 10 years.
If they inherit a Roth IRA:
- No income tax on distributions
- They can let it grow for another 10 years
- All that growth is tax‑free
Name of the game:
- Offset ordinary income (RMDs, W‑2, K‑1s) with tax‑aware hedge funds
- Offset capital gains with long/short SMAs
- Use real estate to create tax‑free income
- Use those deductions to convert IRA → Roth IRA
- Load the Roth with long‑horizon growth (private equity, infrastructure, credit)
If you compound at 12%, money roughly 3x’s every 10 years.
At 15%, it roughly 4x’s every 10 years. Not a promise, just math.
For someone in their late 70s, that’s not just your lifetime.
It’s your kids’ next 10 years on top.
If you (or your parents) are staring at painful RMDs and have $5M+ in total assets, this is exactly the kind of planning I build for families.