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: Which Investment Should I Withdraw From?

September 29, 2022

Whether you are nearing retirement or wanting to buy a new car, taxes are often a big part of the conversation. Thinking through how and when to withdraw from your investments strategically can make all the difference in what taxes you pay afterwards.

Read More

Investing and Coffee

September 22, 2022

In the fall, a lot of people are ready to cozy up with a coffee or latte in their favorite mug. For fun, we talk about the different types of coffee drinks and what kind of investor that might make them. Do you take your coffee the same style you do your investing? Which one are you?

Read More

The Different Kinds Of Annuities

September 15, 2022

To some people, an annuity is almost like a dirty word. In reality, there are a lot of different kinds of annuities, and some are better for your financial plan than others.

Read More

Financial Fortune Cookies

September 8, 2022

What small piece of wisdom can we take away and apply to our financial plan? Eric talks through five fortune cookie statements and what they mean.

Read More

The Worst Investor

September 1, 2022

Which investors will end up ahead in the end? Eric talks through the types that might look successful…until they aren’t.

Read More

What Happens in a Periodic Review With Your Financial Advisor?

August 25, 2022

Think about the taxes! Eric answers three questions from the mailbag today that all involve financial decisions with tax implications.

Read More

Mailbag: Does It Matter Who Gets What Asset in My Legacy Plan?

August 18, 2022

Think about the taxes! Eric answers three questions from the mailbag today that all involve financial decisions with tax implications.

Read More

More than Just a “Nice Person”

August 11, 2022

Financial advisors are people who want to get along with, but you probably want more than just a nice person. We talk through what you should expect with a fiduciary and when you should get a second opinion.

Read More

Mailbag: How Much is Too Much to Spend on a Forever Home?

August 4, 2022

Retirement decisions involve a lot more than just the money, but also the emotional and lifestyle decisions, too. Eric answers three questions from the mailbag from listeners making retirement decisions.

Read More

Financial Jeopardy

July 28, 2022

We play the game of Jeopardy as Eric answers financial questions on today’s show. Do you know all the answers?

Read More

Leave a Comment