Required Minimum Distributions (RMDs) are Changing... AGAIN!

Senior couple meeting financial adviser for investment

 

 

Does anyone really like it when the Government tells you what to do? Of course not!

It’s worse when the Government forces you to pay income taxes you’d otherwise like to defer!
 
What are RMDs (Required Minimum Distributions)?
        
RMDs are the amount of money that must be withdrawn from an employer-sponsored retirement plan, traditional IRA, SEP, or SIMPLE individual retirement account (IRA) by owners and qualified retirement plan participants of “retirement age.”

Forced Distributions

Think about it, if you were 70 years old and had enough income to live on and DIDN’T need money from your tax-deferred savings account, it doesn’t matter, you are FORCED to take some out every year going forward under the RMD rules.

The RMD “retirement age” was moved from 70 to 72 in 2019. And this year the age was moved again... From 72 to 73!

The IRS (Internal Revenue Service) updated their mortality tables and the NEW tables are based on the fact that Americans are living longer.

Because we are living longer, the theory goes that we want to protect ourselves from running out of money (and putting people on Government financial aid) and a good way to keep people solvent into their old age is to move the RMD age.

Good news for anyone 70 or older

This is good news because now those reach age 72 after Dec. 31, 2022 and who don’t need the money. These people won’t be forced to take it and pay unnecessary income taxes. It allows the money to grow tax-deferred for longer thereby allowing you to build more retirement wealth.

ROTH IRAs

Don’t forget that Roth IRAs are NOT subject to RMDs. These are more painful to fund (because there is no deduction), but the benefits of tax-free growth, tax-free withdrawals, and no RMDs makes up for the tax pain when funding

Cash Value Life (CVL) Insurance

Many people are not aware of the tax and investment risk advantages to certain CVL insurance policies. Here are some of the benefits of an indexed universal life policy:

Not subject to RMDs

Tax-free growth

Tax-free cash flow

No downside risks (your cash can’t go backwards because of stock market declines)

Investment gains are locked in annually

If you have a traditional IRA and want to know if a Roth IRA conversion makes sense (sometimes it does and sometimes it doesn’t), please fill out the form below.

If you have an interest in learning more about CVL and how it may be a terrific tax-free retirement vehicle, simply fill out the form below.