On The Agenda:
We get a lot of questions about RMDs or required minimum distributions. Some people don’t know anything about them, while others have misconceptions about how they work. Today, we’ll explain what you need to know.
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Episode Show Notes:
On this episode of How Money Works, Craig and Jennifer Moser share what you need to know about RMDs or required minimum distributions.
If you’ve been saving in an IRA, 401(k), 403(b), etc., you have never paid taxes on it. All of a sudden, at age 72, the government wants you to take a percentage of that money out.
The government dictates how much money you have to take out and how much in taxes you owe on that distribution. There’s no long-term capital gain, no dividend rate, it’s just income out of your account.
It’s a two-edged sword. You don’t have to pay the taxes while saving, but you will absolutely have to pay whatever the tax rate is when you withdraw from those IRAs. You might not need that money, but guess what? You have to take it out.
If you fail to take the money out, there’s a fairly significant penalty. It’s important that you take this very seriously.
The new rules from the SECURE Act say you don’t have to take it until 72 years old. It was 70.5 years.
Some people want to know if they can take more than the minimum that’s required, and that’s totally fine. The government just wants to make sure you’re at least taking the minimum. We have an RMD worksheet we can send you about how this all works and seven things you need to know about them.
So, can you get out of an RMD? You can do a qualified charitable distribution. Instead of giving from your checking account, you can send it from your IRA or 401(k) to a charity you want to support.
Listen to the full episode or use the timestamps below to jump to a certain section. Thanks for listening.
0:22 – What are RMDs?
3:53 – Age 72
6:27 – Get out of an RMD
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