Have you already withdrawn the annual “like-it-or-not, need-it-or-not” distribution from your traditional IRA? If you haven’t, keep in mind you’re required to take minimum withdrawals annually once you reach age 70½, and December 31 is the deadline for avoiding penalties.
What if you don’t need the money for living expenses? You still have to take a required minimum distribution, or RMD, from your account, based on your age and the total prior year-ending balance in all your IRAs.
Once you’ve withdrawn the required amount, deciding what to do with your distribution involves analyzing your entire portfolio, as well as reviewing your tax and estate planning goals.
For example, to limit taxable income, you may choose to invest your RMD in securities that offer growth. Or say your investment allocations have gotten lopsided during the year. You could use your RMD to readjust the mix of assets.
If gifting is part of your estate plan, you may want to make a contribution to a 529 education savings account for a family member. While you generally can’t roll RMDs into other tax-deferred accounts, you are free to use outside assets to set up and fund a 529 plan.
Another suggestion is to convert all or part of the balance remaining in your traditional IRA to a Roth. The conversion is taxable, but no future RMDs are necessary.
Finally, if you have multiple traditional IRAs, consider consolidating them into a single account. You’ll still have to take your RMD each year, but the calculation will be less complicated.
Please give us a call for more information on retirement plan options. We’re here to help.
