As the year winds down, it’s a good time to take stock of your financial to-dos, especially if you’re required to take a Required Minimum Distribution (RMD) for your retirement accounts.
If you’re age 73 or older (or turned 72 before 2023), the IRS requires you to withdraw a minimum amount from your tax deferred retirement accounts each year such as traditional IRAs, SEP IRAs and employer sponsored plans like 401(k)s and 403(b)s.
Why October Matters
While the deadline to take your RMD is December 31, waiting until the last minute can create unnecessary stress and risk:
- Avoid processing delays: Financial institutions can be busy in December. Taking care of your RMD early ensures your withdrawal is processed on time.
- Prevent potential tax issues: Missing your RMD deadline can result in a hefty 25% penalty on the amount you should have withdrawn (reduced to 10% if corrected quickly).
- Strategic planning opportunities: Taking your RMD earlier allows time to coordinate with your advisor on tax-efficient withdrawal strategies, charitable giving through QCDs, or reinvesting excess cash flow.
Multiple Accounts? Here’s What You Should Know
If you have more than one qualified account, it’s important to know how RMDs work across them:
- For IRAs, you can calculate your total RMD across all your IRA accounts and take the full amount from one or a combination of them.
- For employer-sponsored plans (like 401(k)s or 403(b)s), RMDs must be taken separately from each plan.
Coordinating this properly helps ensure you meet the IRS requirements without taking more than necessary.
Qualified Charitable Distributions (QCDs)
If you’re age 70 ½ or older, you can direct up to $100,000 from your IRA to qualified charities each year through a QCD. This donation counts towards your RMD but is excluded from your taxable income, making it an attractive strategy for charitably minded retirees.
How We Help
At LifeBridge Financial Group, we help clients ensure their RMDs are accurately calculated and aligned with their broader financial plan. Whether it’s confirming your distribution, exploring tax smart strategies, or setting up automatic withdrawals for future years, our goal is to make the process seamless and stress free.
Don’t Wait – Check Now
October is the perfect time to confirm you’ve taken care of your RMD. If you’re not sure whether yours has been processed, or if you’d like to discuss ways to make your withdrawals more tax efficient; schedule a quick check-in with your advisor before year end.