If you turned 70½ last year, you should have taken your required minimum distribution from your IRA.
When it comes to your required minimum distribution (RMD), there are stringent rules.
Technically you should take your RMD the year you turn 70½.
However, the money does not actually need to be withdrawn until April 1 of the following year.
What if April 1 is not a normal workday?
According to a recent Kiplinger article titled “Meeting Your First RMD Deadline,” April 1 of this year was a hard deadline.
It is steep.
Fifty percent of the amount you should have withdrawn.
Can you wait until April of every year to make your subsequent RMDs?
You need to take these RMDs by December 31 every year.
If you waited to take your RMD until April, you have another RMD to take by the end of the year.
This could have unexpected consequences.
You could be moved to a higher tax bracket.
You could have to pay the Medicare high-income surcharge.
When would the surcharge apply?
If your adjusted gross income (AGI) and tax-exempt interest income total more than $170,000 for a jointly-filing married couple or $85,000 if you are single.
Can this be avoided?
You can transfer your RMD to charity, killing two birds with one stone.
Is there a limit?
You can only transfer up to $100,000 per year from your IRA to charity, but the transfers must be directly made from your IRA.
You may not withdraw the funds and then transfer them.
That will not work.
Now that you must take RMDs from your IRA, be sure to take withdrawals on time each an every year.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Kiplinger (March 15, 2017) “Meeting Your First RMD Deadline”