Episode #7: RMDs


The Principle:

RMDs are an inevitable part of life, but what are they? Find out, and learn to properly incorporate them into your overall retirement plan.

(Click the featured times below to jump forward in the episode)

Honest Takes:

[00:20] – Use Your RMDs To Rebalance Your Portfolio.

  • Morningstar’s Christine Benz believes you can use your RMDs to rebalance your investments. She suggests pulling your RMDs from riskier parts of your portfolio where you want to make adjustments. Specifically, Benz argues the growth component of equities in your portfolio is a good place to trim. The idea she’s getting at is the importance of having a withdrawal strategy. You need to think where you’re going to withdraw from, and plan ahead. Especially as it pertains to taxes, it’s important to think how your withdrawals will affect your portfolio allocation and what you’ll be paying Uncle Sam.

[4:50] – What’s The Penalty For Not Taking RMDs? 

  • The government requires you to start withdrawing from your qualified retirement accounts at age 70 and 1/2. These withdrawals are called Required Minimum Distributions (RMDs). The government wants to get their cut, so they will tax you if you don’t take your RMDs. The penalty for not taking your RMDs is rather stiff, so it’s important to begin planning for them ahead of time. Think through how your accounts are invested. The types of investments you own will determine how you pay taxes on your withdrawals.

[6:24] – What If You Don’t Need The Income?  

  • If you don’t need the money, consider a Qualified Charitable Distribution (QCD). That satisfies your RMD for the year and helps you to strategize your tax structure. If you give to a charitable organization, Uncle Sam won’t tax your distribution. This enables you to save in taxes owed to the IRS.

More To Learn:

  • [00:56] – Is Summer Too Soon To Plan?
  • [2:50] – Volatility Is Crucial.

Today’s Truth:

Other Virtues:

The host: Brian Bowen – Contact

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