Required Minimum Distribution Basics Part III While you may not always want to withdraw money from your retirement savings, once you reach a certain age you may not have a choice due to a government requirement known as a required minimum distribution (RMD). In this article, we are going to discuss some tax smart strategies for taking your RMD that you might consider discussing with your tax professional. Here’s what you need to know: 1. Reduce taxes by not taking two RMDs in one year. • Account owners can delay their first RMD until April 1st of the calendar year following the year that they turn age 72 (or age 73 if you reach age 72 after Dec. 31, 2022). However, an account owner who chooses to delay the first RMD will have to take two distributions in one year. This could push them into a higher income tax bracket. Talk to your tax professional to determine whether it is beneficial to delay your first RMD or take it during the year your turn age 72 (or age 73 if you reach age 72 after Dec. 31, 2022). 2. Minimize RMD related taxes with a Roth conversion. • Unlike traditional IRAs, Roth IRAs are not subject to the RMD requirements. If you would like to reduce your future RMDs, avoid taking an RMD, or leave a tax-free inheritance to your heirs, a Roth conversion can be a great option. • A Roth conversion is a process that allows you to transfer retirement funds from a traditional IRA into a Roth IRA. There are no income limits or requirements for a Roth conversion. While you cannot make contributions to a Roth IRA if you do not have earned income or your income exceeds certain limits, you may still be eligible to convert funds from a traditional IRA to a Roth IRA. • If you make the Roth conversion, you will owe taxes on the amount converted during the tax year, but you can complete the process over several tax years to spread out the tax liability. 3. Avoid taxes on your RMD by donating it to charity. • If you are charitably inclined, consider a qualified charitable distribution (QCD). A QCD allows IRA owners age 701/2 or older to make charitable donations up to $100,000 directly from their IRA to a qualifying charity each year.
• The QCD amount will not be included in the owner’s adjusted gross income for the tax year that the donation was made during. The lower adjusted
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