5 Things You May Not Know About RMDs
RMDs are minimum amounts that you must withdraw each year from most types of retirement accounts after you reach a certain age. The taxable portion of your withdrawals will be taxed as ordinary income.
Required minimum distributions (RMDs) were waived for 2020 but are back for 2021. Here are a few things you may not know about them.
- The starting age for RMDs is 72 for retirement account owners. The age was increased in 2019 to 72 from 70 ½ for people born after June 30, 1949.
- You may be able to delay the start from a non-IRA retirement plan if you are still working for the company that sponsors the plan, the plan permits the delay, and you do not own 5% or more of the company.
- The RMD deadline is December 31 – unless you turned 72 this year. If you are the account owner, you have the option to take your first RMD as late as April 1 of the year following the year you reach age 72. But keep in mind, that if you wait until the following year to take your first RMD, you will have to take two RMDs that year – one by April 1 for the prior year and one by December 31 for the current year – which may push you into a higher tax bracket.
- RMDs are not required from Roth IRAs during the account owner’s lifetime. However, they are required from Roth 401(k), Roth 403(b), and Roth 457(b) accounts. You may want to consider transferring the savings in those accounts to a Roth IRA at some point in order to avoid RMDs.
- You can donate the RMD from your IRA to charity and avoid taxes. As long as you are age 70 ½ or older, you can generally have up to $100,000 per year distributed tax-free from your IRA directly to qualified charities. The charitable distribution counts toward your RMD for the year and is generally not taxable to you.
If you want to know more about RMDs, please speak with us. With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to provide clarity and calm amidst the chaos. Where there is uncertainty, we look for facts. We call our approach evidence-based investing. Call us today at 802-878-2731 to schedule a strategy session and begin building your road map to financial success.
Article published in July 2021 edition of Eye on Money. If you would like to be added to our mail list please email [email protected].