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Unlocking the RMD Puzzle: Navigating Required Minimum Distributions (RMDs)

Unlocking the RMD Puzzle: Navigating Required Minimum Distributions (RMDs)

December 04, 2023

With the end of the year approaching, it’s time to make sure you have taken the correct amount of Required Minimum Distributions (RMDs) from your retirement accounts. RMDs begin the year you turn 731(a change due to the SECURE 2.0 Act), and fortunately, you can utilize strategic options when taking your RMDs that may provide tax and other benefits.

At MRK Financial Solutions, we can help you navigate the ins and outs of RMDs, and here are a few examples of tools and solutions we use with our clients:

  • Qualified Charitable Distributions (QCDs): We hear a lot about charitable giving this time of year and giving back can also be part of your RMD strategy. You can directly transfer up to $100,000 annually to a qualified charity from an IRA2, which can count toward satisfying your RMD.
  • Roth IRA Conversion: Another strategy involves converting a portion (or all) of your Traditional IRA to a Roth IRA. While this does not directly satisfy the RMD, it can minimize future RMDs, as Roth IRAs do not have RMD requirements during the original account holder’s lifetime3. However, this conversion does incur taxes on the converted amount.
  • Using Life Expectancy Tables: If you have multiple IRAs, you can calculate RMDs for each IRA separately but withdraw the total amount from one account4. This allows you to meet the aggregate RMD requirement across accounts while potentially allowing other accounts to grow tax-deferred for longer.
  • Qualified Longevity Annuity Contracts (QLACs): These are specialized annuities designed to help delay RMDs. With a QLAC, you can use a portion (up to $200,000) of your qualified retirement accounts to purchase an annuity that delays RMDs until a later age5.
  • Employer’s Plan RMD Rules: This one depends on your employer’s plan structure, but if you're still working past age 72, you might not have to take RMDs from your current employer's retirement plan until you retire6. We can look at your employer’s plan and help determine if you need to withdraw.

It's crucial to understand the specific rules and deadlines associated with RMDs, as they can vary depending on factors such as your age, the type of IRA, and any inherited accounts. Set up a time with us to review your RMD requirements and retirement accounts. We can help you choose the most suitable strategy for taking your RMDs while considering your overall financial plan and tax implications.

  1. Irs.gov
  2. Irs.gov
  3. Fidelity.com
  4. Kiplinger.com
  5. Investopedia.com, 2023
  6. Kiplinger.com