Tag Archives: stretch IRA

Required Minimum Distribution (RMD) Part Three (Final): Two Most Important Items of Any RMD, Advanced Techniques

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

  1. Do not forget to take it.
  2. Keep good records.

Stretch IRA/RMD

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.RMD

RMD Deferral

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.

RMD Off-set

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.

  1. Switch the distribution to your taxable account and withhold taxes (far and away our most popular technique.)
  2. Fund a Roth with the RMD funds.
  3.  Spend it.
  4. 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, CFP

8222 Douglas Ave # 590
Dallas, TX 75225 

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