Navigating Your $50k+ RMD: A Comprehensive Financial Guide

Are you grappling with a Required Minimum Distribution (RMD) over $50,000 and unsure about the best course of action? Here's a concise guide to help you navigate your options and make informed decisions.  

Live Off of It:

If immediate expenses demand attention, using your RMD for daily living is a practical choice. However, if your financial situation allows for flexibility, exploring more strategic options is advisable.  

Short-Term Options: 

If the RMD won't be needed for the next 12 months, consider placing it in a money market fund. This provides a safe haven for your funds while you contemplate more long-term strategies.  

Medium-Term Growth: 

Extend your planning horizon to 24 months. If the funds are surplus during this period, consider investing in a globally diversified tax-efficient account. This strategy aims to generate growth while minimizing tax implications.  

Qualified Charitable Distributions (QCD): 

If you're 70½ or older, explore the option of making Qualified Charitable Distributions. This allows you to transfer up to $100,000 per year from your IRA to a qualified charity without counting it as taxable income, satisfying your RMD. It's a tax-efficient way to support causes close to your heart.  

Build a Legacy: 

Consider funding your grandkid's 529 accounts. This not only supports their education but establishes a legacy focused on saving, investing, and higher education—a gift that keeps on giving.  

Gift to Family: 

Explore gifting options within the annual exclusion limits. In 2023 and 2024, individuals can gift up to a specified amount without triggering gift taxes, allowing you to share your financial success with loved ones. For more information on Wealth Transfer, you can read our free eBook.

Roth Conversion: 

For a long-term strategy, contemplate a Roth conversion. As an example, if your RMD is $50,000, you could convert $125,000 of your traditional IRA to a Roth IRA, utilizing the entire RMD to cover associated taxes. This strategy allows for potential tax-free growth, sidestepping future RMD requirements on the converted amount. 

However, caution is paramount. Consulting with a tax professional or financial advisor well-versed in tax planning is crucial. Transactions of this magnitude may impact IRMMA, social security benefits, Medicare costs, and other expenses. Weigh the benefits against potential drawbacks, ensuring the chosen strategy aligns with your broader financial goals. 

In conclusion

The decision on what to do with a substantial RMD involves careful consideration of financial goals, current needs, and long-term plans. Whether supporting family, contributing to the community, or strategically growing wealth, tailored advice from a financial advisor is essential. This ensures you make informed decisions aligning with your specific circumstances and securing your financial future. Have more questions? You can schedule a free call with us today!

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by GW Financial, Inc. to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2023 GW Financial, Inc.