In our final of a three-part series of RMD, these are the most complicated techniques and very specific in nature. Every situation is different, please check with us or your tax professional prior to implementing any of these, as these are not recommendations, only possibilities. These techniques can be very helpful “if the shoe fits!”
Before we begin, one last reminder.
Two Most Important Items for any RMD
- Do not forget to take it.
- Keep good records.
Rather than distributing all funds immediately or over a mandated five-year period of time, giving heirs the opportunity to S*T*R*E*T*C*H (my attempt at grammatical humor) their IRA and other qualified benefits can be very tax friendly. Having a trust as beneficiary or keeping your old company 401k plans disqualify you from this in most cases, another reason why we rarely find it a better option to keep an old 401k at a company plan.
If you are still working, you may be able to defer your RMD for the company plan you are a participant. VERY IMPORTANT … the other qualified IRA plans will most likely still require summing the total and distributing a required RMD. This option is very specific in nature, check with us, your tax professional, or your HR representative for exact details, and keep good records of your discussions.
“In and out” of certain qualified plans I.e. SEP or others may be a possibility. If you are mandated to take and RMD, but still working, you may be able to make/receive an offsetting contribution. Be sure to check your plan specifics on this technique.
RMD Distribution Techniques
Eventually, no matter what you will need to take an RMD, so here are the popular options for where the rubber meets the road.
- Switch the distribution to your taxable account and withhold taxes (far and away our most popular technique.)
- Fund a Roth with the RMD funds.
- Spend it.
- Donate to charity.
In closing, we hope you have enjoyed our three-part series. Here is the link to the First Part “What and Why?” and Here is the Link to Part Two “Should You Take it Early?”.
Have a Great Day!
John Kvale CFA, CFPhttp://www.jkfinancialinc.com http://www.street-cents.com 8222 Douglas Ave # 590 Dallas, TX 75225