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Forbes
20-05-2025
- Business
- Forbes
Understanding Your RMD Options Before Turning 73
Do I have to take an RMD? As I turn 73 later this year, I've reached a significant, if dubious, milestone. I'm now subject to Required Minimum Distributions (RMDs). It's worth taking a moment to celebrate reaching this point. Having to take RMDs suggests that I've accumulated enough assets to require such withdrawals. I'd rather be in this position than having nothing to distribute. But now, like many other individuals turning age 73, I have to make some decisions. My RMDs will be subject to ordinary income tax, and that's a concern. I'm still working and don't need the income. Nonetheless, I have to start taking my RMDs soon, and this means more income taxes and an increase in my Medicare premiums because of the dreaded IRMAA penalty. Fortunately, I have some options. And if you're in a similar situation, so do you. Preplanning as an option The basic formula for RMDs is straightforward. You take the sum of your qualifying accounts (traditional IRAs, 401(k)s, etc.) and divide that number by an IRS life expectancy factor. The resulting number is the amount you must take in the year you turn 73 - or suffer a 25% penalty. However, with preplanning you have several options for determining what that sum of accounts will equal when you turn 73. That number can be lowered. In my case, several years ago I took two steps to significantly improve my RMD situation by initiating a Roth conversion and purchasing a Qualified Longevity Annuity Contract (QLAC). The Roth conversion lowered my balances that are subject to lifetime RMDs. And, the QLAC I purchased delays when I must start taking RMDs on those funds. My QLAC will not be subject to RMDs for years down the road. Another planning opportunity exists if you're still working. Employment allows you delay some of your RMDs. For example, if you are still employed this year, you typically don't have to take RMDs on your workplace 401(k) account until you retire. The point is you're not necessarily stuck with high RMDs at age 73. You can do some preplanning to lower and/or delay taxable withdrawals. Now what? If you are turning 73 anytime this year, first ask yourself if you need the money, or is this just more income being imposed on you that'll increase your taxes? If you need the money, RMDs are not really an issue. Take the money, pay the tax, and enjoy retirement. If, however, these distributions are unwanted current income, consider your options going forward: Take this year's RMD when you reach age 73 Since your RMD is based on your account's value for end-of-year 2024, there's no market timing involved. You know your account balance and your age. Your RMD is set, and you can take the distribution now. For example, assume your accounts that are subject to RMDs totaled $1 million at the end of 2024. Your age 73 factor is 26.5, so you'll need to take at least $37,736 this year to satisfy your RMD. This is true irrespective of whether your account values have since slid down or increased. Wait to take this year's RMD until the end of the year This approach might help you better assess your overall tax situation, as you'll likely have a clearer picture of your final taxable income for the year. For example, you may unexpectedly decide to retire this year – causing your income tax bracket to be lower next year. Having this information may help you decide whether to take your RMD this year or consider using the next option. Defer this year's RMD until next year In your first year of RMDs there is a tempting opportunity to procrastinate. The law grants a one-time option to defer taking your first RMD payment until the following year, as long as you take it by April 1 of that year. This option is appealing because it allows more time to implement tax-efficient strategies. However, a significant downside is that this would require you to take two RMDs in the same tax year. Next year you would have to double up your RMDs. While this strategy might save taxes in 2025, it could significantly increase your taxes – and other costs – in 2026. For example, if you have a high income this year and expect it to continue into next year, delaying your RMD may inflict costs beyond additional ordinary income taxes. The extra RMD you take next year could cause you to be in a higher capital gains bracket, put you in a higher threshold for IRMAA's Medicare premiums, or subject you to the Net Investment Income (NII) tax. Piling taxable income into one year often generates increased expenses. Which is the best option? what's the solution? When turning age 73, tax modeling is crucial. First, identify all your accounts that are subject to RMDs. Then, assess their availability and liquidity. Although you'll be able to calculate your RMDs early in the year, you have some flexibility as to whether and when to take them. The key next step is to decide from which accounts you want to withdraw your RMDs. RMDs must be calculated separately for each account, but the total amount of your RMDs can sometimes be withdrawn from any one or a combination of your accounts. For example, you can aggregate an IRA and SEP IRA account and take your combined RMDs out of only one account. Be careful though. Aggregation of RMDs is not permitted in some cases, for example if you have a 401(k) and an IRA. Also, be sure to have the liquidity available to take the distribution in cash. If your accounts are heavily concentrated in equities, consider transferring your liquid funds into the accounts that will be used to satisfy your RMDs. Finally, if you truly don't need the additional income, and have a charitable bent, consider directing your RMDs (maximum of $108,000 in 2025) to a qualified charitable distribution (QCD). As early as age 70 ½ you can use a QCD to directly transfer money from your IRA to a qualified charity. As long as certain rules are met QCDs can be counted toward satisfying your RMDs for the year. Rather than having to deduct your charitable contribution from your tax return, you directly offset your RMD obligation, a far better tax result. Planning for Future RMDs Choosing when, where and how to take RMDs in the first two years is just one part of the strategy. You should also plan for subsequent years. Continued Roth conversions, additional QLAC purchases, and utilizing QCDs can further shield your assets from the tax sting of future RMDs. Roth conversions remain a compelling option even when you're subject to RMDs. Roth accounts do not have lifetime RMDs, providing tax-free growth for later distributions. However, you cannot use Roth conversions as a way to avoid current RMDs on accounts you have; plus, converting will increase your taxable income, potentially compounding your current tax headaches. Still, depending on your future tax situation, Roth conversions may work well in the long run. Another plan for the future is to create or increase QLACs. In 2025, the total limit for QLACs is $210,000. This financial instrument reduces the IRA balance subject to RMDs by allowing an annuity purchase to defer income well into the future. For example, if you purchase a QLAC at age 73 and the annuity payments in your QLAC are scheduled to begin at age 80, you have deferred RMDs – and saved taxes - for seven years. Once you begin, however, your payments are subject to income taxation. Accordingly, much like Roth conversions, this approach demands careful tax management. A hassle or an opportunity? Selecting the best RMD strategy involves weighing your current financial needs against long-term objectives. A holistic approach ensures that you meet immediate cash flow requirements while managing tax liabilities and maintaining flexibility in retirement. Don't just put off RMDs; figure out how to best manage your retirement income and taxes.
Yahoo
21-02-2025
- Business
- Yahoo
Craig Wear Releases Roth Conversion Reset Addressing Lifetime Taxes
Craig Wear introduced a proven roadmap that minimizes tax burdens, helps IRA millionaires avoid RMD pitfalls, and builds a tax-free legacy. Craig Wear Releases Roth Conversion Reset Addressing Lifetime Taxes Golden, CO , Feb. 20, 2025 (GLOBE NEWSWIRE) -- The window of opportunity may stay open longer for IRA millionaires, as a potential extension of today's historically low tax rates brings renewed hope for even more tax-saving opportunities. Craig Wear, CFP® and founder of Q3 Advisors has released , a game-changing book that helps high-net-worth individuals legally minimize taxes and protect their wealth. This strategic roadmap provides proven insights that have helped clients avoid an average of $3.2 million in lifetime taxes—before it's too late. Craig Wear & Q3 Advisors For decades, Wear has specialized in helping IRA millionaires navigate tax policies that often favor the IRS over the individual. His latest book, An IRA Millionaire's Roadmap to Renewed Tax Savings with Pro Tips from the Trenches, presents a step-by-step framework for leveraging Roth Conversions to secure long-term tax advantages. "In my decades of tax planning, I've seen too many high-net-worth individuals unknowingly follow the IRS's plan—not their own," says Wear. " gives them a clear, actionable framework to take control before policy changes limit their options." As tax policies remain in flux, Q3 Advisors has helped clients collectively avoid over $2.5 billion in taxes through strategic Accelerated Roth Conversions—a proactive, results-driven approach that goes beyond conventional financial advice. Unlike traditional methods that focus solely on tax rates, their strategies take a holistic view, integrating tax law, RMD management, Medicare impact, and estate planning to maximize long-term savings. With an average client savings of $3.2 million in lifetime taxes, their unique approach proves that timing, structure, and execution are just as important as the decision to convert. Roth Conversion Reset builds on these proven, data-backed methods, offering a step-by-step guide to capitalizing on today's historically low tax rates before they disappear. The book provides clear, actionable strategies to minimize RMD burdens, reduce exposure to future tax hikes, and ensure IRA millionaires keep more of their wealth for retirement and future generations. Readers will also gain access to three expert bonus chapters covering investment allocation, charitable giving, and estate planning, essential components of a comprehensive tax strategy. Featuring real-world case studies from Q3 Advisors, the book looks inside at how Wear's tax-saving strategies have reshaped the financial futures of IRA millionaires. Unlike traditional financial advisors, Q3 Advisors does not sell financial products or require clients to switch advisors. Instead, their flat-fee fiduciary model ensures unbiased guidance focused entirely on maximizing tax efficiency and preserving wealth. Unlike traditional financial advisory firms, Q3 Advisors does not sell financial products or manage assets. Instead, Wear and his team focus solely on guiding IRA millionaires through tax-efficient retirement planning. Their expertise in Roth Conversions helps clients shift their retirement savings into tax-free accounts, avoiding the looming threat of higher future tax rates. With Congress considering changes that could eliminate key Roth Conversion opportunities, Wear emphasizes the importance of acting now. His book equips readers with the knowledge to make informed decisions before these advantages disappear. Roth Conversion Reset empowers IRA millionaires with the knowledge and strategies to legally minimize taxes and secure a tax-free legacy before policy changes eliminate these opportunities. Backed by the expertise of Q3 Advisors, this book provides a proven, step-by-step framework that has already helped clients avoid $2.5 billion in taxes. As a leader in Accelerated Roth Conversions, Q3 Advisors continues to equip high-net-worth individuals with the tools to take control of their financial future—before time runs out. Readers can access Roth Conversion Reset instantly in full-color PDF format for just $3.95 at About Craig Wear & Q3 Advisors Craig Wear is a nationally recognized authority in tax-efficient retirement planning, specializing in Accelerated Roth Conversions. As the founder of Q3 Advisors, he has dedicated his career to helping IRA millionaires navigate tax policy shifts, secure their financial futures, and build tax-efficient retirement plans without selling financial products or managing assets. His expertise has saved clients billions in unnecessary taxes while empowering them with a proactive approach to long-term wealth preservation. ### Media Contact Q3 Advisors Phone: (970) 919-1061 Website: Attachment Craig Wear Releases Roth Conversion Reset Addressing Lifetime Taxes
