Page 6 - The Shores of Jupiter- November '23

Page 6, The Shores

Financial Focus ®

What Should you Know

about Rmds?

By Sally Sima Stahl
You may spend decades
contributing to various
retirement accounts.
But for some accounts,
such as a traditional IRA
and 401(k), you must
start withdrawing funds
at a certain point. What
should you know about
this requirement?
To begin with, the
rules governing these withdrawals – technically called
required minimum distributions, or RMDs – have
changed recently. For many years, individuals had to
begin taking their RMDs (which are based on the account
balance and the IRS’ life expectancy factor) when they
turned 70½. The original SECURE Act of 2019 raised
this age to 72, and SECURE 2.0, passed in 2022, raised
it again, to 73. (If you turned 73 in 2023, and you were
72 in 2022 when the RMD limit was still 72, you should
have taken your first RMD for 2022 by April 1 of this
year. You will then need to take your 2023 RMD by
Dec. 31. And going forward, you’ll also need to take
your RMDs by the end of every year.)
Not all retirement accounts are subject to RMDs. They
aren’t required for a Roth IRA, and, starting in 2024,
won’t be required for a Roth 401(k) or 403(b) plan. But
if your account does call for RMDs, you do need to take
them, because if you don’t, you could face tax penalties.
Previously, this penalty was 50 percent of the amount you
were supposed to have taken, but SECURE 2.0 reduced
it to 25 percent.
When you take your RMDs, you need to be aware of
a key issue: taxes. RMDs are taxed as ordinary income,
and, as such, they could potentially bump you into a higher
tax bracket and possibly even increase your Medicare
premiums, which are determined by your modified
adjusted gross income. Are there any ways you could
possibly reduce an RMD-related tax hike?
You might have some options. Here are two to consider:
• Convert tax-deferred accounts to a Roth IRA
account. You could convert some, or maybe all, of your
tax-deferred retirement accounts to a Roth IRA. By
doing so, you could lower your RMDs in the future –
while adding funds to an account you’re never required
to touch. So, if you don’t really need all the money to
live on, you could include the remainder of the Roth
IRA in your estate plans, providing an initially tax-free
inheritance to your loved ones. However, converting a
tax-deferred account to a Roth IRA will generate taxes
in the year of conversion, so you’d need the money
available to pay this tax bill.
• Donate RMDs to charity. In what’s known as a
qualified charitable distribution, you can move up to
$100,000 of your RMDs directly from a traditional IRA to
a qualified charity, avoiding the taxes that might otherwise
result if you took the RMDs yourself. After 2023, the 747-PALM
$100,000 limit will be indexed to inflation.
Of course, before you start either a Roth IRA 747-7256
conversion or a qualified charitable distribution, you will
need to consult with your tax advisor, as both these moves
have issues you must consider and may not be appropriate
for your situation.
But it’s always a good idea to know as much as you
can about the various aspects of RMDs – they could play Peripheral
a big part in your retirement income strategy.
This article was written by Edward Jones for use by Neuropathy?
your local Edward Jones Financial Advisor, Edward
Jones, Member SIPC.
Edward Jones is a licensed insurance producer in FREE Consultation
all states and Washington, D.C., through Edward D.
Jones & Co., L.P., and in California, New Mexico and
Massachusetts through Edward Jones Insurance Agency for Acupuncture
of California, L.L.C.; Edward Jones Insurance Agency of
New Mexico, L.L.C.; and Edward Jones Insurance Agency
of Massachusetts, L.L.C.
Edward Jones, its employees and financial advisors
cannot provide tax advice. You should consult your
qualified tax advisor regarding your situation.
Contact us at (561) 748-7600, Sally Sima Stahl, AAMS, 561-745-1002
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