I don’t have to “dump them into my checking account”. What can you do with RMD?

Financial Planners


Susanna Snyder, CFP

Susanna Snyder, CFP

The time is approaching to receive the required Minimum Distributions (RMD) from your Individual Retirement Account (IRA). I’m baffled as to what I can do with this anticipated large sum of cash. You don’t necessarily have to transfer money to your checking account.

– Tommy

Retirees who do not need the cash from the Minimum Required Distributions (RMD) do not need to deposit it directly into their checking account. Fortunately, there are various options to make RMD work better.

Please note that taxes may arise depending on how you process your RMD. Therefore, it is important to be aware of its impact. Here’s what RMD does if you don’t need cash: (If you have more questions about investing or retirement, this tool can help match you with potential advisors.)

Consider in-kind distribution

Ask your advisor: It doesn't have to be

Ask your advisor: It doesn’t have to be “was deposited into your checking account”. What can you do with RMD?

In-kind distributions allow you to transfer or withdraw assets from your account while keeping them invested, rather than cashing them out.

The advantage of distributing your assets this way is that your money will continue to be invested in stocks, exchange-traded funds, mutual funds, or other investments. This is especially beneficial if you have recently experienced losses and want to wait for your investment to recover before cashing it in.

One drawback is the need to be able to cover the taxes associated with distribution. (If you have additional questions about the tax implications of your investment decisions, this tool can help match you with potential advisors.)

Choose a QCD

A Qualified Charity Distribution (QCD) allows taxpayers to transfer assets directly to charity, avoiding the need to pay taxes on the distribution.

QCD is an option for people who don’t really need RMD money to pay their living expenses and prefer to use it to fund charitable causes.

Additionally, strategic use of QCD can provide other important retirement benefits. They take money off the account holder’s taxable income that can reduce Medicare premiums. Additionally, those who utilize this strategy before RMD age (which will be available to individuals over the age of 70 and a half) will be able to minimize his RMD in the future and benefit from an overall tax-advantaged retirement account. can reduce the value of (If you have more questions about investing or retirement, this tool can help match you with potential advisors.)

convert to ross

Ask your advisor: It doesn't have to be

Ask your advisor: It doesn’t have to be “was deposited into your checking account”. What can you do with RMD?

As we approach the RMD era, consider the benefits of strategically converting dollars from traditional IRAs to Roth.

Roth accounts are not subject to RMD, and performing a Roth conversion can reduce future taxes, minimize or eliminate mandated distributions, and give you more control over your money in the future. Again, these conversions are taxed, so plan accordingly. (If you have additional questions about the tax implications of your investment decisions, this tool can help match you with potential advisors.)

Conclusion

There are various ways to approach RMD without dumping into a checking account. However, some of these approaches can impact your tax liability, investment strategy, and retirement income. If you are not sure how to proceed, consider working with a knowledgeable financial her advisor.

Tips for Finding a Financial Advisor

  • Finding a financial advisor is not difficult. SmartAsset’s free tool matches you with up to 3 vetted financial advisors serving your area and allows you to interview advisor matches for free to determine which advisor is right for you. increase. If you’re ready to find an advisor who can help you reach your financial goals, get started now.

  • Consider several advisors before deciding on one. Finding someone you trust to manage your money is important. As you consider your options, here are some questions to ask your advisor to help you make the right choice:

Susannah Snider, CFP®, is a financial planning columnist for SmartAsset, answering reader questions on the topic of personal finance. Have a question you want answered? Send an email to AskAnAdvisor@smartasset.com. Your question may be answered in a future column.

Note that Susannah is a SmartAsset employee, not a SmartAdvisor Match platform participant.

Photo credit: ©Jen Barker Worley, ©iStock.com/Halfpoint, ©iStock.com/Tom Merton

Post Ask Your Advisor: You Don’t Have To “Dumped Into Your Checking Account”. What can you do with RMD? First appeared on the SmartAsset blog.

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