How is it already December?! So much to do, so little time!
This time of year can bring a lot of joy mixed with a little angst. Finishing up fieldwork, planning for holiday gatherings, Christmas shopping… anything that can be put off for later gets tagged with “try me after the first of the year”.
Something that we, as financial advisors, keep on our radars this time of year are RMDs or Required Minimum Distributions. Penalties for failure to take these distributions are 25% of every dollar not taken, so if you’re due to take yours, it isn’t something you want to put off until “after the first of the year”. Especially with Inherited IRAs, which must be taken out within 10 years of the decedent’s death.
Account owners and beneficiaries of the following accounts apply:
- Traditional IRAs
- SEP IRAs
- SIMPLE IRAs
- 401(k) plans
- 401(b) plans
- 457(b) plans
- Profit sharing plans
- Other defined contribution plans
- Roth IRA beneficiaries
The age you must begin distributions is changing in the future but at the time of this writing it is 73. The amount you are required to withdraw is based on your prior end-of-year balance divided by a life expectancy factor published by the IRS. If you’re working with an advisor, they will have taken the liberty of calculating and executing the RMD on your behalf. If you’re doing it on your own, there are tons of helpful calculators online to make sure you’re taking the right amount.
Now, what to do with these funds? Some people earmark them for Christmas shopping or family vacations. Some use them for income. Some simply transfer them to a brokerage account to continue to invest in the market. Growing in popularity is using the RMD for charity gifting.
Even if you’re still working and saving, charity giving can benefit both the recipient and the donor. When you donate cash to an IRSqualified 501(c)(3) public charity, for example, you can generally deduct up to 60% of your adjusted gross income. For most of us in small communities, we’d rather see our hard-earned money go to deserving organizations that directly serve us and our communities rather than to distant government taxation. Fire departments, churches, legions, memorial funds, etc. are often completely reliant on these generous gifts.
Whether you are in a saving phase, drawing from your portfolio, or even legacy planning, there are ways to make your money reflect your values.
Let us help!
Ashlea (Kleitsch) Jones
Financial Advisor
Prime Capital Investment Advisors
Cedar Rapids, Iowa
pciacedarrapids.com
1815 Boyson Rd.
Hiawatha, IA 52233
P: (319) 269-7143
This information does not constitute legal or tax advice. PCIA and its associates do not provide legal or tax advice. Individuals should consult with an attorney or professional specializing in the fields of legal, tax, or accounting regarding the applicability of this information for their situations.
