Episode #27: It’s Time To Talk About RMDs

Today’s Prep:

Required minimum distributions can easily slip through the cracks of your retirement plan. As tax day 2019 is approaching, understand the impact RMDs will have on your finances.

(Click the featured times below to jump forward in the episode)

Equipping Points:

[00:46] –  Why Do RMDs Exist?

  • Simply put, required minimum distributions (RMDs) exist because the IRS wants its money. The IRS enables you to put money in a tax-deferred retirement account, but eventually, they require you to withdraw from it. When you withdraw from that account, they tax the money you withdraw, and this withdrawal is called a required minimum distribution.

[1:41] – How Much Do You Have To Withdraw? 

  • People think you have to withdraw at least ten percent of your account, but that’s not true. There’s actually a table that helps you to determine what you’ll need to withdraw. It’s a bit tricky to navigate, but your advisor should be able to walk you through the process.

[2:39] – A Simple Illustration.

  • Eric illustrates how to calculate your RMD if you turn 70 1/2 this year.

[3:58] – Can You Avoid RMDs?

  • Well sort of, but in order to avoid your RMDs, you’d either have to lose money or run out of money completely. Neither of those goals are worthy of pursuit, so it’s better just to follow the rules and take your RMDs. If you don’t, the government can penalize you.

[4:25] – A Change To Qualified Charitable Distributions.

  • Let’s say you’re in a situation where you have to withdraw $10,000 from your qualified retirement accounts as your RMD. Let’s also suppose you’re charitable. If you send that money to a charitable organization, you won’t have to pay the taxes on that RMD. However, you can’t ever touch that money yourself. It has to go directly to whichever charity you’d like to support. The IRS will tax that money the minute it touches your account.

[5:31] – The Value Of A Roth Conversion.

  • You can also convert your tax-deferred accounts to Roth IRA and Roth (401)k accounts. After all, you don’t have to take an RMD out of a Roth account.

[5:59] – Plan For The Death Of A Spouse.

  • Many couples fail to consider economic impact of losing a spouse. Eric explains how your taxes can actually increase when you lose your spouse.

Today’s Takeaway:

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

Subscribe To The Podcast:

Apple Podcasts  -  Google Podcasts  -  Spotify  -  Stitcher  -  iHeartRadio  -  TuneIn

Check out some other recent episodes

Mailbag: Do I Need Long-Term Care Insurance If I Expect an Inheritance?

July 22, 2021

Looking for a way around paying for long-term care insurance? Will an inheritance cover it? Eric answers this question and two others from the mailbag.

Read More

401(k) Mistakes You Don’t Want To Make

July 15, 2021

Many of us have a 401(k), but what mistakes can get overlooked? Eric shares a few key points to keep in mind when it comes to your 401(k).

Read More

Financial Blind Spots

July 8, 2021

What kind of blind spots should you look out for when it comes to your financial plan? We talk about four key areas that often get overlooked when retirement planning.

Read More

SECURE Act 2.0 – What to Know

July 1, 2021

Do you know about the changes proposed in the SECURE Act 2.0? Eric shares a few of the highlights as well as his thoughts on the changes.

Read More

Why People Put Off Meeting with a Financial Advisor

June 24, 2021

Are you avoiding meeting with an advisor? Let’s talk through some of those fears or doubts and help you overcome the hurdles to getting your financial plan in order.

Read More

Emotions That Drive Financial Decisions

June 17, 2021

Are you letting emotions sway your investing decisions? We talk about what emotions should you look out for and how can you invest based on logic.

Read More

Mailbag: What Should I Do With My IRA?

June 10, 2021

When should you use your IRA and how can it be best utilized? These three questions from the mailbag all mention their IRA as an option, but what does Eric have to say about all of these situations? Find out!

Read More

Avoiding the Tax Time Bomb

June 3, 2021

Are you nervous about all the taxes you might have to pay in retirement? We talk through strategies you can implement now to reduce your taxes down the road.

Read More

The ‘What If?’ Game

May 27, 2021

Are you looking at the future and wondering, “What if…?” We talk through several scenarios to see what may or may not be possible and how you can prepare accordingly. 

Read More

Navigating the New Administration’s Tax Plan

May 20, 2021

What kind of tax plans have been proposed lately? These plans may cause you to strategize differently when it comes to your financial plan.

Read More

Leave a Comment