Required Minimum Distributions after 70 ½Submitted by Bradford Financial Center on October 24th, 2017
You have options if you’re 70 ½ and are required to take your annual Required Minimum Distribution (RMD).
The fact is, some retirees don’t need the money in the now but when you turn 70 ½ these RMD should work to your advantage, your tax advantage. Here’s how…
Circle Back to Reinvesting
Certainly, the distribution must come out but there are ways to put it back in through reinvesting. If it makes sense and you’ve discussed it with your financial advisor, there are municipal bonds that do generate income and are typically exempt from Federal taxes. Depending on the muni bond, it may also be exempt from state and local taxes.
Tax-Free Education Gifts
Another way to reinvest the RMD for future growth is by funding a 529 for your child or grandchild. The good news is that the future earnings for your budding student are tax free and an investment now will grow based on the market value and be a great gift when your student is ready to go to college. What’s more is that even if one grandchild in the family doesn’t use it, the 529 money is transferrable to another family member (parent or sibling). You may also qualify for a deduction depending on your state for that contribution. Check with your financial advisor to make the most of this educational investment.
Consider your favorite charity or church when you prepare for the RMD. Nonprofits are all too happy to work with your financial advisor to set up the paperwork that can allow retirees to transfer tax-free your RMD.
Forming Your RMD Plan
At Bradford, we manage each client’s RMD schedule by consulting with you and calculating the minimum distribution amounts based on the IRS rules. These RMD retirement accounts may include a 401(k), IRA, SIMPLE IRA, IRA, or 403 (b).
Your best first step is to talk with your Financial Advisor and determine the best time to make take your RMD because you will owe income tax on what is withdrawn from your retirement account. There are certain instances when taxes can be withheld from the withdrawal.
Discuss your RMD options with a Bradford Financial Advisor today!