The time is approaching to receive the required Minimum Distributions (RMD) from your Individual Retirement Account (IRA). I’m baffled as to what I can do with this anticipated large sum of cash. You don’t necessarily have to transfer money to your checking account.
– Tommy
Retirees who don’t need cash Required minimum distribution (RMD) No need to dump directly into your checking account. Fortunately, there are various options to make RMD work better.
Please note that taxes may arise depending on how you process your RMD. Therefore, it is important to be aware of its impact. Here’s what RMD does if you don’t need cash: (If you have more questions about investing or retirement, This tool helps match you with potential advisors.)
Consider in-kind distribution
Ann In-kind distribution Instead of cashing out assets, you can transfer or withdraw assets from your account while maintaining invested status.
The advantage of distributing your assets this way is that your money will continue to be invested in stocks, exchange-traded funds, mutual funds, or other investments. This is especially beneficial if you have recently experienced losses and want to wait for your investment to recover before cashing it in.
One drawback is the need to be able to cover the taxes associated with distribution. (If you have additional questions about the tax implications of your investment decision, This tool helps match you with potential advisors.)
Choose a QCD
a Qualified Charitable Distribution (QCD) Allows taxpayers to transfer assets directly to charities, avoiding the need to pay taxes on distributions.
QCD is an option for people who don’t really need RMD money to pay their living expenses and prefer to use it to fund charitable causes.
Additionally, strategic use of QCD can provide other important retirement benefits. They take money off the account holder’s taxable income that can reduce Medicare premiums. Additionally, those who take advantage of this strategy before RMD age (which will be available to individuals over 70 and a half years old) will be able to minimize his RMD in the future and pay for his entire tax-advantaged retirement account. can reduce the value of (If you have more questions about investing or retirement, This tool helps match you with potential advisors.)
convert to ross
As you approach the age of RMD, consider the following benefits: Strategically convert dollars from traditional IRAs to Roth.
Roth accounts are not subject to RMD, and performing a Roth conversion can reduce future taxes, minimize or eliminate mandated distributions, and give you more control over your money in the future. Again, these conversions are taxed, so plan accordingly. (If you have additional questions about the tax implications of your investment decision, This tool helps match you with potential advisors.)
Conclusion
There are several ways to approach RMD. checking accountHowever, some of these approaches can impact your tax liability, investment strategy and retirement income. If you’re not sure how to proceed, consider working with a knowledgeable financial advisor.
Tips for Finding a Financial Advisor
-
find a financial advisor It doesn’t have to be difficult. SmartAsset free tools will match you with up to 3 vetted financial advisors who serve your area. You can interview Advisor Matching for free to determine which advisor is right for you. If you are ready to find an advisor who can help you reach your financial goals, get started now.
-
Consider several advisors before deciding on one. Finding someone you trust to manage your money is important.Considering the options, these are Questions to ask your advisor to help you make the right choice.
Susannah Snider, CFP®, is a financial planning columnist for SmartAsset, answering reader questions on the topic of personal finance. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.
Note that Susannah is a SmartAsset employee, not a SmartAdvisor Match platform participant.
Photo credit: ©Jen Barker Worley, ©iStock.com/Halfpoint, ©iStock.com/Tom Merton
post Ask your advisor: You don’t have to “dump into your checking account.” What can you do with RMD? first appeared SmartAsset Blog.