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How You Can Reduce Your RMD

Sarah Brenner, JD
Director of Retirement Education

By Sarah
                                                          Brenner, JD

When you contribute to a traditional IRA you make a deal with Uncle Sam. You can get a tax deduction and tax deferral on any earnings in your IRA. However, eventually the government is going to want its share and will require funds to come out of these accounts. That is when you must start required minimum distributions (RMDs). You may not need the money and you may not want the tax hit. Here are some strategies that can help reduce your RMD.


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Q: I have a client who died in 2021 before taking his 2021 RMD. He designated various charities as beneficiaries of his IRA.

The IRA custodian is advising the executor to take the RMD, however according to a previous post by Mr. Slott, Revenue Ruling 2005-36 states in this scenario the RMD is to be paid to the beneficiaries. I suggested the client ask the custodian to request confirmation from their legal department. Any other steps?

Answer

Q: Would a person who took a CRD from his IRA in 2020, with intent to repay within 3 years, be disqualified from taking a distribution and making a 60-day rollover in 2021 if it is within 12 months of the CRD?

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Q: If you are an employee who participates in a 401(k) who retires at age 73, do you have to take an RMD in the year you retire, or can you take your RMD by April 1 of the year following retirement? If you can take your RMD by April 1 of the following year, does that mean you have to take two RMDs in that year?

Answer

Q: I recently saw an email from you on QCDs when deductible IRA contributions are made in the same year. It discussed how these two transactions interact with each other. I am also wondering if the offset to the QCD would also occur for a SEP IRA or SIMPLE IRA contribution?

Answer

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