Saving money for retirement in a 401(k) or IRA comes with some big tax advantages. Any money you contribute to the account is tax deductible. On top of that, you won't pay any taxes on gains or dividends earned in the account. That can give you a lot more money to invest today and help you reach your retirement goals faster.

But eventually the government wants its tax revenue. That's why it imposes required minimum distributions, or RMDs, on those accounts starting when you reach age 73. At that point, you'll have to start taking withdrawals from your retirement accounts and paying income taxes on the amount. If you inherited an IRA from someone else, you might also have to take RMDs from that account.

If the government requires you to take a bigger RMD than you actually need for living expenses, it can have a serious impact on your finances. Not only do you lose the tax advantages of keeping your savings in an IRA or 401(k), but you'll also find your tax bill ballooning. As such, it often pays to take actions that can lower your RMD both this year and in the future. Here are three ways to do exactly that.

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1. Qualified charitable distributions

If you're charitably inclined, using a qualified charitable distribution, or QCD, is a great way to reduce your RMD. Instead of withdrawing funds from your IRA, you can send them directly to a qualified non-profit. Any amount you send will count toward your RMD, but it won't count as taxable income.

There are a few important details when it comes to QCDs. First, you must be at least age 70 1/2. That means if you have an inherited IRA, you might not be able to take advantage of this method. Second, QCDs only apply to IRAs. So, you'll still have to take your RMDs from any 401(k)s or other qualified plans subject to minimum distributions. Lastly, QCDs are limited to $108,000 in 2025. That limit applies to each individual. So, if you and your spouse each have substantial IRAs with big required minimum distributions, you can each reduce them by $108,000, or $216,000 total.

Using a qualified charitable distribution is one of the most effective ways to reduce your taxes in retirement. Since the money goes directly to a non-profit, it won't affect your adjusted gross income. That means several things for retirees. First, you can take the standard deduction instead of itemizing, which could reduce your taxable income lower than if you had to itemize to include your charitable giving. Second, your adjusted gross income can have a significant impact on how much, if any, of your Social Security counts as taxable income. Lastly, a lower adjusted gross income could also lower how much you pay for Medicare Part B premiums.

2. Take your RMD early in the year

If your RMD exceeds the amount you'll actually need to spend to live in retirement, you might be inclined to put it off until late in the year. But waiting until late in the year to take your RMD will, on average, result in a bigger RMD in the following year.

Your RMD is based on the value of your retirement account at the end of the previous year. If you want a lower RMD, you want to lower that amount.

If you expect the assets in your retirement account to increase in value over time (and you should), removing them earlier in the year will decrease the value of the account at the end of the year. That will reduce your RMD for the next year. While the reduction might be modest, it can compound over the years.

It's important to note that taking your distribution early in the year doesn't mean you need to keep the distribution sitting around in cash. You can continue to hold the same investments in a taxable brokerage account. If you hold those assets for at least a year and a day, you'll benefit from the lower long-term capital gains tax rate. That's better than the regular income tax rate you'd pay if you kept the assets in your retirement account as long as possible. And if you pass on those assets to your heirs, they'll receive a step-up in basis, further lowering the taxes on the assets.

If you plan to reinvest the assets in your retirement account, you can even take your distribution in kind. That's when your financial institution transfers the exact stocks, bonds, or funds you hold in your retirement account to a taxable account. That way, you'll never miss out on a day in the market.

3. Make a Roth conversion

Roth conversions don't count toward your RMD in the year they're made, but they can substantially lower your RMDs in future years. And right now could be a great opportunity to lock in historically low tax rates. The Tax Cuts and Jobs Act is set to expire at the end of the year, so there's no telling if you'll be able to lock in such low tax rates again in the future.

When you make a Roth conversion you remove funds from your traditional IRA or 401(k) and put them in a Roth account. Doing so requires you to pay taxes on the amount converted, but you get to keep those assets in the tax protected account for as long as you want. Roth accounts aren't subject to RMDs. In effect, you pay the taxes now and gain more flexibility.

Roth conversions are most effective before you have to start taking RMDs since you can't convert the required distribution. That said, it's never too late as long as the tax rates are appealing. It's important to note that conversions will count toward your taxable income, so they could have a negative impact on other aspects of your finances like Social Security taxes and Medicare premiums. Be sure to factor those things into your "effective tax rate" to ensure it's worthwhile. You might need to do a series of smaller conversions over time in order to minimize your taxes, but every little bit will help.

You can combine all three of these tips to have a bigger impact on your RMDs this year and in the future: Make a qualified charitable distribution to meet your RMD, convert some of your accounts to Roths, and do it early in the year.