Latest news with #RMDs
Epoch Times
24-05-2025
- Business
- Epoch Times
Can You Control Required Minimum Distributions?
Once you reach required minimum distributions (RMDs) age (73), how much control do you have over the timing, amount, and source of your distributions? Let's examine each of the levers. Timing Retirees exert some control over the start of RMDs via their required beginning date, which is April 1 following the year in which they turn 73. Deferring this tax bill by close to a year might seem like a win, but you'll have to take an additional RMD by the following year-end. That means that delaying the first RMD isn't often advisable. People over age 73 who are still working and covered by a retirement plan can also typically delay RMDs from that plan. But if they have an individual retirement account (IRA) separate from the plan, RMDs are still due from the IRA. Once RMDs are up and running, retirees can take their RMDs at any time during the year. Some take them early so they don't forget, while others delay them until year-end to coincide with other year-end tax planning and charitable giving. One common misconception about RMDs is that you could reduce the tax bill by taking the distribution when the market is down and your account balance is low. In reality, the amount of your RMD is effectively 'cooked' by the end of the previous year. For example, your 2025 RMD amount is based on your account balance as of year-end 2024. The Amount Investors have a bit more control over the amount of their RMDs, though the opportunity to lower them and the taxes due is greatest in the pre-RMD years. Making contributions to Roth accounts rather than traditional tax-deferred vehicles is a key lever. The postretirement, pre-RMD years are also an excellent time to convert traditional IRA balances to Roth at a life stage when people usually have significant control over taxable income. Accelerating withdrawals from RMD-subject accounts can also make sense in those postwork, pre-RMD years, enabling investors to lower their RMD-subject balances when their tax rate is low relative to what it might be later on. Related Stories 12/31/2024 2/13/2024 Once RMDs start, charitable giving is the best way to lower taxes on RMDs. Making a qualified charitable distribution (QCD) from an IRA is an option once you reach age 70½, which can help you avoid the taxes that would normally be due if you took the RMD and spent it. In addition, the QCD amount satisfies all or a portion of your RMD, and it also lowers your RMD-subject balance. The Source Retirees have a fair amount of control on determining which accounts or holdings to take RMDs from. Strategic RMD-taking won't lower the taxes due on the distribution, but it can help take risk out of the portfolio or achieve other investment aims. For example, let's say I have 10 holdings in my IRA, a combination of U.S. and non-U.S. stocks, bonds, and cash. As long as I pull the right amount from the IRA for my RMD, I can apply some investment strategy to determine where I go for that withdrawal. After an equity market rally, for example, I may wish to pull all of my RMD from U.S. equities to rebalance and reduce risk in my portfolio. Retirees with multiple IRA accounts can also concentrate their RMD-taking in specific accounts. Let's say I have two separate IRA accounts—one holding index mutual funds and a smaller IRA with individual stock holdings. If desired, I could take all of my 2025 RMD from my account with individual stock holdings and leave the fund portfolio alone. What matters is that you take the right amount from the IRAs, not where you go for them. There is an important caveat here, though, which is that if you have RMD-subject accounts that are different types—say, an IRA and 401(k)—you must calculate your RMD amount for each account separately and take an RMD from each. By Christine Benz of Morningstar The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Forbes
20-05-2025
- Business
- Forbes
Strategic Roth Conversions: Timing Your Tax Strategy For Maximum Retirement Value
The largest transfer of retirement wealth in history is happening—not to heirs, but to the IRS. Roth conversions aren't just about tax rates; they're about creating tax-free optionality throughout retirement and for your heirs. Recently, I met a couple who were planning for retirement. They had done everything "right': maxed out 401(k)s for decades, built a $2.5 million nest egg, and were ready to enjoy their golden years. But they didn't realize they were sitting on a tax-time bomb that would detonate when they turned 73. With Required Minimum Distributions (RMDs) and Social Security, they'd be forced into higher tax brackets than during their working years—exactly the opposite of what traditional retirement planning promises. Their situation isn't unique. Millions of successful savers are unknowingly heading toward unnecessary taxation. However, a window of opportunity exists between retirement and RMDs that could save six or even seven figures in lifetime taxes—if you understand how to navigate Roth Conversions and this sweet spot. The typical approach, 'convert to fill your current tax bracket,' oversimplifies a complex opportunity. Effective Roth conversion strategies consider: When properly integrated, these factors reveal your true "Conversion Sweet Spot,' which might be significantly larger or smaller than conventional wisdom suggests. For many retirees, this phase offers the largest conversion potential, especially if: Even after RMDs begin, tactical conversion opportunities may exist: Strategic Roth conversions require coordination with: Roth conversions aren't just about tax rates, they're about creating tax-free optionality throughout retirement and for your heirs. In an increasingly tax-uncertain future, this flexibility may prove to be your retirement plan's most valuable asset. All of this said, make no mistake: What people need when they retire is cash flow, not necessarily taxable income.
Winnipeg Free Press
20-05-2025
- Business
- Winnipeg Free Press
Can you control required minimum distributions?
Once you hit required minimum distributions age (73), how much control do you have over the timing, amount, and source of your distributions? Let's examine each of the levers. Timing Retirees exert some control over the start of RMDs via their required beginning date, which is April 1 following the year in which they turn 73. Deferring this tax bill by close to a year might seem like a win, but you'llhave to take an additional RMD by the following year-end. That means that delaying the first RMD isn't often advisable. People over age 73 who are still working and covered by a retirement plan can also typically delay RMDs from that plan. But if they have an IRA separate from the plan, RMDs are still due from the IRA. Once RMDs are up and running, retirees can take their RMDs any time in the yearthat they wish. Some take them early so they don't forget, while others delay them until year-end to coincide with other year-end tax planning and charitable giving. One common misconception about RMDs is that you could reduce the tax bill bytaking the distribution when the market is down and your account balance is low. In reality, the amount of your RMD is effectively 'cooked' by the end of the previous year. For example, your 2025 RMD amount is based on your account balance as of year-end 2024. The amount Investors have a bit more control over the amount of their RMDs, though the opportunity to lower them and the taxes due is greatest in the pre-RMD years. Making contributions to Roth accounts rather than traditional tax-deferred vehicles is a key lever. The postretirement, pre-RMD years are also an excellent time to convert traditional IRA balances to Roth at a life stage when people usually have a lot of control over taxable income. Accelerating withdrawals from RMD-subject accounts can also make sense in those postwork, pre-RMD years, enabling investors to lower their RMD-subject balances when their tax rate is low relative to what it might be later on. Once RMDs start, charitable giving is the best way to lower taxes on RMDs. Making a qualified charitable distribution from an IRA is an optiononce you reach age 70.5, which can help you skirt the taxes that would normally be due if you took the RMD and spent it. In addition, the QCD amount satisfies all or a portion of your RMD, and it also lowers your RMD-subject balance. The source Retirees have a fair amount of control on determining which accounts or holdings to take RMDs from. Strategic RMD-taking won't lower the taxes due on the distribution, but it can help take risk out of the portfolio or achieve other investment aims. For example, let's say I have 10 holdings in my IRA, a combination of US and non-US stocks, bonds, and cash. As long as I pull the right amount from the IRA for my RMD, I can apply some investment strategy to determine where I go for that an equity market rally, for example, I may wish to pull all of my RMD from US equitiesto rebalance and reduce risk in my portfolio. Winnipeg Jets Game Days On Winnipeg Jets game days, hockey writers Mike McIntyre and Ken Wiebe send news, notes and quotes from the morning skate, as well as injury updates and lineup decisions. Arrives a few hours prior to puck drop. Retirees with multiple IRA accounts can also concentrate their RMD-taking in specific accounts. Let's say I have two separate IRA accounts—one holding index mutual funds and a smaller IRA with individual stock holdings. If desired, I could takeall of my 2025 RMD from my account with individual stock holdings and leave the fund portfolio alone. What matters is that you take the right amount from the IRAs, not where you go for them. There is an important caveat here, though, which is that if you have RMD-subject accounts that are different types—say, an IRA and 401(k)—you must calculate your RMD amount for each account separately and take an RMD from each. ___ This article was provided to The Associated Press by Morningstar. For more personal finance content, go to Christine Benz is the director of personal finance and retirement planning at Morningstar.
Yahoo
20-05-2025
- Business
- Yahoo
Can you control required minimum distributions?
Once you hit required minimum distributions age (73), how much control do you have over the timing, amount, and source of your distributions? Let's examine each of the levers. Timing Retirees exert some control over the start of RMDs via their required beginning date, which is April 1 following the year in which they turn 73. Deferring this tax bill by close to a year might seem like a win, but you'llhave to take an additional RMD by the following year-end. That means that delaying the first RMD isn't often advisable. People over age 73 who are still working and covered by a retirement plan can also typically delay RMDs from that plan. But if they have an IRA separate from the plan, RMDs are still due from the IRA. Once RMDs are up and running, retirees can take their RMDs any time in the yearthat they wish. Some take them early so they don't forget, while others delay them until year-end to coincide with other year-end tax planning and charitable giving. One common misconception about RMDs is that you could reduce the tax bill bytaking the distribution when the market is down and your account balance is low. In reality, the amount of your RMD is effectively 'cooked' by the end of the previous year. For example, your 2025 RMD amount is based on your account balance as of year-end 2024. The amount Investors have a bit more control over the amount of their RMDs, though the opportunity to lower them and the taxes due is greatest in the pre-RMD years. Making contributions to Roth accounts rather than traditional tax-deferred vehicles is a key lever. The postretirement, pre-RMD years are also an excellent time to convert traditional IRA balances to Roth at a life stage when people usually have a lot of control over taxable income. Accelerating withdrawals from RMD-subject accounts can also make sense in those postwork, pre-RMD years, enabling investors to lower their RMD-subject balances when their tax rate is low relative to what it might be later on. Once RMDs start, charitable giving is the best way to lower taxes on RMDs. Making a qualified charitable distribution from an IRA is an optiononce you reach age 70.5, which can help you skirt the taxes that would normally be due if you took the RMD and spent it. In addition, the QCD amount satisfies all or a portion of your RMD, and it also lowers your RMD-subject balance. The source Retirees have a fair amount of control on determining which accounts or holdings to take RMDs from. Strategic RMD-taking won't lower the taxes due on the distribution, but it can help take risk out of the portfolio or achieve other investment aims. For example, let's say I have 10 holdings in my IRA, a combination of US and non-US stocks, bonds, and cash. As long as I pull the right amount from the IRA for my RMD, I can apply some investment strategy to determine where I go for that an equity market rally, for example, I may wish to pull all of my RMD from US equitiesto rebalance and reduce risk in my portfolio. Retirees with multiple IRA accounts can also concentrate their RMD-taking in specific accounts. Let's say I have two separate IRA accounts—one holding index mutual funds and a smaller IRA with individual stock holdings. If desired, I could takeall of my 2025 RMD from my account with individual stock holdings and leave the fund portfolio alone. What matters is that you take the right amount from the IRAs, not where you go for them. There is an important caveat here, though, which is that if you have RMD-subject accounts that are different types—say, an IRA and 401(k)—you must calculate your RMD amount for each account separately and take an RMD from each. ___ This article was provided to The Associated Press by Morningstar. For more personal finance content, go to Christine Benz is the director of personal finance and retirement planning at Morningstar. Christine Benz Of Morningstar, The Associated Press Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
USA Today
20-05-2025
- Business
- USA Today
Don't need your required minimum distribution just yet? What to do with the cash influx.
Don't need your required minimum distribution just yet? What to do with the cash influx. Show Caption Hide Caption How are tariffs and your 401(k) retirement savings intertwined? Experts say a rise in tariffs can lead to several factors that impact your retirement savings. For many retirees, 73 is the magic age – the time they must begin withdrawing required minimum distributions (RMDs) from their retirement accounts. Retirees born in 1960 or later have until 75 to start taking RMDs. However, what do you do if you don't need the money just yet? Here are five ideas. 1. Reinvest There's no rule saying you can't withdraw funds from your retirement accounts and immediately reinvest them elsewhere. Here are some popular options: Dividend stocks and ETFs Real estate investments Municipal bonds Taxable brokerage accounts 2. Make a qualified charitable contribution (QCD) If you're 70-and-a-half or older and must take an RMD from a traditional individual retirement account (IRA), you can arrange for it to be directly donated to a qualified 501(c)(3) organization of your choice. Not only will you feel good about your decision, but you'll also: Enjoy a tax break since the amount donated is excluded from taxable income. Fulfill some or all of your RMD requirements for the year. 3. Convert to a Roth IRA If you're withdrawing money from a pre-tax retirement account, like a 401(k), consider the benefits of converting that money to a Roth IRA. It's important to remember that you'll need to pay taxes on any pre-tax withdrawals, and Roth IRA contributions are subject to income limits. Still, you may find the benefits outweigh those two points. There are several benefits associated with converting cash from a pre-tax account to a Roth IRA, including: Your withdrawals from a Roth IRA are tax-free. Roth IRAs have no RMDs. Roth IRAs can be passed to heirs tax-free. Age for Social Security benefits: What's retirement age for full Social Security benefits? It's not the same for everyone. 4. Purchase life insurance It's easy to think of life insurance as something you only need during working years when the loss of your income would be detrimental to the people you love. However, have you considered how a life insurance policy might come in handy for your loved ones after you die? Here are some of the reasons retirees purchase life insurance: Cover final expenses Pay off debt after your death Leave money to family or charity Help beneficiaries pay inheritance taxes or any other expense they may run into after you're gone 5. Plan for the worst As well-established as you may be in retirement, you never know what's around the corner. It may be something as simple as a storm that blows through your area and takes part of your roof or something as scary as a serious medical issue. In either case, you'll need money. Unless you have a large emergency savings account, consider using spare RMD dollars to stuff into that emergency fund. Who knows? You may get several years down the road, realize you have far more than necessary in emergency savings, and make a new plan for the cash. In the meantime, you know you've got yourself (and whatever may come your way) covered. Having more money than you need is a luxury. Take all the time you need to determine where your money can do the greatest good for you and those you care about around you. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $ 22,924 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
