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What is Required Minimum Distribution (RMD)? – Ep23

What is Required Minimum Distribution (RMD)?

by: Annette Bau, CFP®

RMD is the acronym for Required Minimum Distribution.

It is also referred to as MRD (Minimum Required Distribution).

It means taking money from your pre-tax account so Uncle Sam can get a cut.

In this episode, we will dive into people’s questions regarding RMD.

For example:

  • What is the rule about taking RMD before April 1st of the year and what happens if you miss it?
  • Why is the December 31 account balance important and what happens if I have more than one account?
  • What are the rules regarding a 403 B plan, a simple IRA, and a traditional IRA?
  • Which rules apply to Roth IRAs, and how are they different than other retirement accounts?
  • What happens if you have turned 72 before April or if you will turn age 73 in the future year?
  • Who is the account holder of a beneficiary IRA?
  • What is the Secure Act and the Uniform Lifetime Table? And, why does it matter?

Summary: Wealth Inside and Out® Podcast – “What is Required Minimum Distribution?”

Hi, my name is Annette Bau (bah oo), your Wealth Inside and Out®> Podcast host. I’m a Certified Financial Planner™ and founder of The Millionaire Insider®.

This is the Wealth Inside and Out® Podcast.

Hi, my name is Annette Bau (bah oo). I’m a Certified Financial Planner™ and founder of The Millionaire Insider®.

This is the Wealth Inside and Out® Podcast.

Free Retirement Plan Checklist

Today’s bonus resource is the Retirement Plan Checklist, you can go to Retirement Plan Checklist You are going to love this free resource. It provides an overview of required actions to avoid worrying about running out of money and ensure you can live your life and retirement on your terms. We share insights in this free resource that many people don’t consider before retiring.

One of the most common concerns of women is becoming a bag lady. This guide is a great first step to creating a plan so you can stop worrying about your financial future and start enjoying your life. Access the checklist here: Retirement Plan Checklist.

Disclosure

All materials and intellectual property are copyrighted by MillionaireSeries.com®.

This information is for educational purposes only. It is not intended to replace any advisor or specialist or provide investment, financial, tax, retirement, planning, or healthcare advice.

By accessing this content, you agree to hold MillionaireSeries.com® and its affiliates harmless for results achieved or not achieved.

Let’s dive into

“What is Required Minimum Distribution?”

Understanding Pretax Dollars

Understanding Pretax Dollars

Pretax dollars include money deposited in your pre-tax account before taxes are paid. Examples include an IRA, 401, TSP, or 403B.

Taxes need to be paid on these funds – that is where the required minimum distribution comes into play.

IRS Guidelines for Required Minimum Distributions

The IRS has guidelines regarding the minimum amount you must take out and pay taxes on for the year.

The distribution is age-driven, based on life expectancy. The IRS continues to change the age, so search it online for the current age or check with a qualified tax advisor.

There are penalties for not taking enough money out, so make sure you or a qualified advisor correctly calculates the RMD amount.

Always Consult with a Qualified Advisor

always consult with a qualified advisor

Checking with a qualified advisor before taking out your RMD is important. You just don’t want to take out the wrong amount.

If you have the time to research the amount and verify it is accurate, great.

Consulting with a qualified tax professional is worth the time and money for most people.

Deferring Your Asset to Heirs

Why are you required to take a minimum distribution versus letting you defer it and then pass it on to your heirs?

In the IRS code, Congress allows you to save some money and defer the taxes on it for decades.

Think about it. You start putting money in your 401K at 20 years old and Estate Planning Checklist you get your contribution matched by your employer, the principal and interest will likely grow and compound for decades.

No one has paid taxes on that money, and the IRS needs to get tax revenue.

Taxation is how the country funds government expenses, and this is one source of tax revenue.

It’s simply paying your fair share of money that has not previously been taxed.

RMD Rules for Beneficiaries

different RMD rules for beneficiaries

Most people die with some money left over in their IRA that has not been taxed.

IRS Rules For Spouses and Children

Spouses have the most beneficial rules because Congress wants to protect spouses to some degree and not bankrupt them.

In 2019, the IRS changed the rules for someone who died in 2020 or after. As a result, many people have to pay more in taxes.

If you need support, click here:
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Generically speaking, you have ten years to get the money out of an IRA if you’re a non-spouse, inheritor, or beneficiary. As a result, you will have more taxable income so plan accordingly.

A mix of rules comes into play depending on the age of the person inheriting and the age of the person who died.

A trust (or non-human) must take out the money in five years. Therefor, you need to create a tax plan when you inherit money.

In today’s episode, we dive into exceptions to the rule, including what to do if you have multiple retirement accounts and when to separate them.

Recap – “What is Required Minimum Distribution”

what is RMD

We learned who must take RMD and the different ages. It’s gone up to 73 from 72 and will likely continue to change, so confirm it online or with a qualified advisor. We also reviewed when you can defer RMD and what to do if you have multiple accounts.

Penalties have been lowered, but you need to take the minimum amount required by law to avoid penalties.

We talked about the difference between an IRA and a Roth IRA, which is important, and then what to do if you have several accounts.

Until our next episode, take one action that will help you create a secure financial future and retirement you love.

Click here to get your free financial checkup:

CTA FC Free Financial Checkup

Congratulations on taking another step to create a financially free life you love. Are you unsure about your financial future or that it’s in order? Or are you ready to stop worrying about money or possibly the fear of becoming a bag lady and ending up broke in retirement?

If you are ready to know your financial house is in order so you have a secure financial future, please go to Free Financial Checkup.

It’s the next best step to avoid an NSF notice in the future. As a result of applying the content, you can stop worrying and start enjoying your life.

The number of women who were not broke or poor while working or married is staggering. Our mission for The Wealth Inside and Out® Podcast is to ensure you have critical information for you, your family, your friends, and anyone willing to listen to it and apply it to create a financially free life you love.

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If you love the content, please open the Apple Podcast on your iPhone. Scroll down to the bottom, click five-star review, and leave a review. We really appreciate it.

Click here to follow and leave a review.

Thank you so much for joining me for

“What is Required Minimum Distribution (RMD)?”

I’m Annette Bau (Bah oo).

All international copyrights are reserved.

Bye for now.

Links Mentioned In This Episode

  • Retirement Plan Checklist
  • Free Financial Checkup
  • Support Request
  • The Wealth Academy
  • Follow and Leave a Review

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About Annette Bau, CFP®

7 Principles of Becoming a Millionaire for Life The 7 Principles of Becoming a Fulfilled and Wealthy Millionaire," contains over 30+ years of research on money, mindset, and success. Click to get the 7 Principles.

About Annette Bau, founder of The Millionaire Insider®
Hi, I'm Annette

I'm a mid-western girl who began investing $25 per month and turned it into a multi-million dollar empire. I love hiking, skiing (not always lovin' it when I'm trying to catch my kids :) ), yoga, matcha tea lattes, and working because I choose to. My commitment? Teach you how to secure a retirement and financially free life you love!
Click to learn more.

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