Required Minimum Distribution (RMD) Part One … What and Why??

For many, once we reach the age of 70.5 IRA and other Qualified plans mandate a distribution so Uncle Sam can get his fair share of taxes. For some, RMD’s or Required Minimum Distributions occur even sooner.

What is an RMD ?

A Required Minimum Distribution (RMD) occurs most frequently for those turning age 70.5 with IRA or other Qualified (fancy word for never taxed $$) funds. In certain instances, as an example, if a stretch IRA has been commenced, in order to avoid taxes, any age person may be required to complete a RMD.

Why an RMD ?RMD

Taxes, taxes, taxes… In almost all cases the underlying reason for the mandatory distribution is to pay Uncle Sam his due. Before getting too upset, remember, these funds most likely have been deferred without taxes, grown/compounded tax deferred, and are just now becoming taxable.  Taxes are ONLY on the funds withdrawn … Not a Bad deal!!

Required means Required … DO NOT FORGET

Uncle Sam has the right to charge a 100% tax on funds not distributed that were in need. While there are certain workarounds if you forget, be safe, keep good records, and make sure you are taking those RMD’s in a timely fashion.

Next week, more neat techniques, time-saving ideas, and special circumstance options with our RMD series !

We as a firm are beginning the distributions now for clients, most often just moving funds from a tax deferred/qualified account to a taxable account and withholding taxes … More on this technique later.

Have a Great Day!

John Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225

One response to “Required Minimum Distribution (RMD) Part One … What and Why??

  1. Pingback: Using an IRA distribution to offset an Active Income Loss | $treet-¢ents

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