Take Steps Now to Head Off RMD Penalties

Year-end is a critical time for retirees who are subject to required minimum distributions (RMDs) from their qualified retirement accounts. To avoid a hefty penalty of 50% of the amount that should have been withdrawn, your RMD must be taken annually by the end of the calendar year. (Note that this differs from the deadline for your first RMD, which must be taken before April 1 of the year after you turn 72.)

But what if taking the RMD—which counts toward your income—will result in paying higher taxes or increasing your Medicare insurance premiums? If you’re over age 72 and don’t need the RMD to cover current living expenses, you have another option: the qualified charitable distribution (QCD):

• Instead of taking an RMD, a qualified charitable distribution permits a direct transfer of up to $100,000 from your IRA to a qualified charity.
• Qualified charitable distributions automatically satisfy RMDs for the year when it’s made, which is a real advantage for charitable-minded IRA owners who don’t need RMDs to live on.
• It’s important to remember that funds that have already been distributed to you and are then contributed to charity don’t qualify as a qualified charitable distribution.

If you have questions about RMDs or qualified charitable distributions, or need assistance with year-end financial and tax strategy, don’t hesitate to call and schedule time to talk.

This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to be used in lieu of specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.