21 // RMDs & QCDs

2023-12-26

Once you reach a certain age the government forces you to take withdrawals from your retirement account. These withdrawals affect your taxable income, medicare premiums, and even your ability to leave money to your heirs. I'm referring to required minimum distributions or RMDs. Most people are familiar with RMDs, but not as many people are aware of planning opportunities that they can use to help control the effects of making required withdrawals. Sam shares practical strategies that we can use to get the most out of our distributions.

Most people are familiar with RMDs, but not as many people are aware of planning opportunities that they can use to help control the effects of making required withdrawals. Sam shares practical strategies that we can use to get the most out of our distributions.

Episode Highlights:

[02:48] Sam shares an example of a required minimum distribution. 401k and IRA savings are pre-tax. When we take funds out they are going to be taxable.

[04:28] RMDs are required once someone hits 73 years old for this year. People are living longer, so they are moving the ages back.

[06:34] If you have multiple accounts, each one will have its own RMD. You can take the aggregate amount from any account.

[07:30] There are penalties for not taking your RMDs.

[08:29] If you take money out, you need to pay taxes on it.

[09:39] If you put money in a 529 plan, you can save on federal taxes. You can also fund a Roth for a family member.

[10:55] Qualified Charitable Distributions or QCDs can be given straight from a retirement account to a qualified charity. This will satisfy the RMD and no one will have to pay taxes on those dollars.

[12:04] If you're already donating to a charity, you might want to consider a QCD.

[12:42] A Roth conversion is where you take pre-tax dollars and convert them to a Roth which is tax-free. You pay taxes when you withdraw the money. Once it's in the Roth, it can grow tax-free for the remainder of your life.

[13:39] A Roth conversion is a great strategy for people who care about legacy.

[15:36] Bonus: Still working, you don't have to start taking your RMDs until you retire.

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

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