The news of potential government rule changes has brought to light how challenging and confusing Required Minimum Distributions (RMDs) can be for retirees. For some, RMDs are used for everyday living expenses, but according to a study by Allianz Life, 80% of respondents aged 65-75 don’t think that they will need all of their RMDs for these daily expenses. However, it then leaves retirees asking about how they should use this money, and how it can potentially impact their personal financial situation. Figuring out how to make the most of your RMDs can help you achieve your financial and lifestyle goals for retirement.
First, let’s talk about what an RMD actually is. RMDs are distributions that you are required by law to take from your tax-advantaged savings accounts every year starting at age 70 ½. If you forget to take these required minimum withdrawals, you could be faced with a penalty of up to 50% on what you were supposed to withdraw. So, although you may think you’re done with deadlines when you reach retirement, there’s still some important birthdays to be aware of to help avoid costly penalties. Also, moving forward from your 70 ½ birthday, you’ll have to continue taking RMDs throughout your entire retirement, so make sure before 2018 ends that you’ve taken care of your yearly required minimum withdrawal, if it pertains to your current situation.
Different age groups are bound to have different priorities, but overall the consensus among retirees remains that they want to use their RMDs to work with their financial goals. Those goals range from improving a financial situation to helping their portfolio grow by learning to use RMDs in a certain way. Everyone has different priorities and it’s important to pinpoint exactly what your personal goals are when it comes to RMDs.
Working with a financial professional is the best way to get advice on managing your Required Minimum Distributions. This way, you can find the right solution to handle taxes and learn the larger financial strategy that fits your specific needs. They can even explain tax efficient strategies for charitable giving that could help you figure out how to use your RMDs.
At Epstein & White, we want to work with you to cover all aspects of your retirement from Required Minimum Distributions and taxes to lifestyle and estate planning and everything in between. Click here to schedule your no cost, no obligation financial review. We’ll review all of your accounts and documents so that you can feel confident and secure in your retirement decisions.