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

Do You Agree or Disagree with this Retirement Advice?

April 8, 2021

Which of these statements is worth paying attention to and which ones should you take with a grain of salt? Eric shares whether he agrees or disagrees with five retirement planning statements.

Read More

Mailbag: Can I Sell My Home and Just Rent in Retirement?

April 1, 2021

Ever consider a retirement plan that seems a little unorthodox? There’s no one-size-fits-all when it comes to financial planning, so Eric answers three questions in the mailbag from people considering a less traditional decision to make their plan work for them.

Read More

What Creates A Sense of Urgency With Your Financial Plan?

March 25, 2021

Have you been procrastinating putting together a financial plan or do you have a sense of urgency? What events may prompt you to act quickly?

Read More

Should You Follow Dave Ramsey’s Financial Advice?

March 18, 2021

Is the baby step program and financial advice from Dave Ramsey for everyone? What does a registered financial consultant have to say about it?

Read More

Financial Wisdom from Calvin and Hobbes

March 11, 2021

Perhaps a bit unexpected, the comic strip Calvin and Hobbes had a lot of great life and financial advice to dole out. Which of these apply to your financial situation?

Read More

Can You DIY Financial Planning?

March 4, 2021

What reasons might someone debate going DIY when it comes to a financial plan? Is it better to go to an advisor or is sometimes DIY right for you?

Read More

Translating Financial Jargon

February 25, 2021

Do you know the difference between large cap and small cap funds? What are basis points? This episode will discuss various financial jargon to help translate what these really mean.

Read More

Financial Fill in the Blank

February 18, 2021

What’s the best way to not run out of money in retirement? What are most people worried about when retirement planning? Eric fills in these blanks in today’s episode.

Read More

What to Know About Biden’s Initial Executive Orders

February 11, 2021

Let’s take a look at some of Biden’s executive orders so far in his first few weeks. How could they alter your financial plan?

Read More

Mailbag: Retirement Planning With Separate Bank Accounts

February 4, 2021

From managing your income as a contract employee to managing your income in retirement, Eric answers three questions from the mailbag in today’s episode of the podcast.

Read More

Leave a Comment