Moving States to Save on 401(k) RMDs? A $2.1 Million Case Study Reveals the Hidden Federal Cost

1 month ago 24

Marc Guberti

Tue, July 28, 2026 astatine 11:55 AM CDT 6 min read

Quick Read

Moving from California to Nevada eliminates the 9.3% authorities income taxation connected RMDs, redeeming six figures implicit 20 years connected a $2.1 cardinal IRA.
Nevada residency doesn't hole national exposure: IRMAA surcharges footwear successful supra $109,000 MAGI, and up to 85% of Social Security stays federally taxable.
A Qualified Charitable Distribution of up to $111,000 successful 2026 tin fulfill the full archetypal RMD and support it retired of AGI completely.
Two retirees, aforesaid $1 million, aforesaid 4% rule, bargain 1 finished with $1.4 million, the different deed $0 successful 12 years. Our escaped scholar usher explains the flaw that separated them, and the income-first method built to debar it.

A caller station connected r/personalfinance describes precisely this move: a begetter who rolled a ample 401(k) into a accepted IRA astatine 72, past relocated from California to Nevada for what the poster called "a 9.3% instant savings erstwhile RMD hits." The specifics acceptable a communal profile: a $2.1 cardinal balance, a archetypal required minimum organisation 1 twelvemonth away, and a California taxation measure that grows each twelvemonth the relationship does. The mathematics connected wherefore the U-Haul is worthy it, and the national trap the determination does not solve, is much absorbing than the headline.

A middle-aged blonde pistillate successful a yellowish long-sleeve garment and bluish jeans sits adjacent to a bearded antheral successful a greenish button-up garment and acheronian pants connected a airy grey sofa. The pistillate holds a smartphone and points astatine its screen, portion the antheral holds respective achromatic papers. They some look intently astatine the documents and phone. A metallic laptop, a peach-colored mug, and much papers are connected a tiny woody java array successful beforehand of them. A bookshelf is disposable successful the blurred background.

The RMD Number That Starts the Cascade

Under the IRS Uniform Lifetime Table, the divisor astatine property 73 is 26.5. On a $2.1 cardinal balance, that produces a first-year required organisation of astir $79,245. Every dollar counts arsenic mean income, and the fig climbs annually arsenic the divisor shrinks. By the precocious 70s, an untouched portfolio compounding astatine marketplace rates volition propulsion mandatory withdrawals good past $100,000.

California treats that income arsenic wages. A azygous filer pulling $79,245 successful RMDs runs done the state's graduated brackets and lands astir $3,800 successful authorities taxation the archetypal year, with the marginal dollar taxed astatine 9.3%. California's apical marginal complaint reaches 13.3%, and the Tax Foundation ranks the authorities 49th retired of 50 connected idiosyncratic income taxation competitiveness. Nevada ranks 7th and imposes 0% idiosyncratic income tax.

The 4% Rule is Broken, Built On A World That No Longer Exists

Every retiree knows astir the 4% rule, but it frames status arsenic a dilatory liquidation and inactive causes retirees with seven-figure accounts to agonize implicit a meal out.

There's a antithetic mode to tally the mathematics that makes much consciousness today. Build an income floor — dividends, interest, and Social Security that screen your indispensable bills each period — and you ne'er person to merchantability shares into a down marketplace conscionable to wage them.

Our escaped scholar guide, The 4% Rule Is Broken, walks done it successful astir 15 minutes. Access the study here.

Read Entire Article