Getting the Most Out of Your Required Minimum Distribution… With the ever-changing landscape of taxes, it is growing increasingly difficult to understand how legislation affects you and could possibly impact your financial future. The following information and provide you with practical information and ideas. By April 1 of the year following turning 70½, taxpayers must begin to take a required minimum distribution (RMD) from their IRA accounts. 1. Business owners who own 5% or more of a business must also begin to take RMDs from that business’s qualified retirement plan 2. Many times individuals don’t want or need to take these RMDs, so how do you turn this requirement into an opportunity? There are several ways to maximize the potential of your RMDs. Purchase Life Insurance- One of the best ways to leverage an RMD for the future generation is through an insurance policy. Life insurance provides a potential tax-free death benefit to your heirs and allows you through leverage to potentially give them much more than the balance available in your IRA today. This option is particularly attractive if your beneficiaries are in a higher tax bracket than you are. Purchase Long-Term-Care Insurance- Another great way to leverage an RMD is through the purchase of long-term-care insurance. Long term- care insurance provides a way to protect assets should you ever need in-home or assisted nursing care. With the ever-growing cost of assisted living, it is important to have this insurance. Fund a 529 Plan- Funding a 529 plan is a great way to leave a legacy with your children or grandchildren. If you have an RMD that is more than the IRS annual gifting limit, using 529 plans allows you to gift five times the annual gifting limit in one year. Keep in mind that strategy can only be used once every five years. Make a Charitable Gift – Donor-Advised Fund- Charitably-inclined individuals can use their unwanted RMDs to give money to their favorite charity through a donor-advised fund. A donor-advised fund allows you to make a tax-deductible (up to 50% of adjusted gross income) contribution to the fund. The fund managers then manage the assets and make distributions to your charity of choice. The investments grow tax free, offering you the potential to give more over time. Reinvest- If you have an unwanted RMD, keep in mind that you can simply reinvest it into a non-qualified account. By reinvesting these dollars, you have the ability to potentially grow these assets over the long term. RMDs are a part of retirement and they are unlikely to go away any time soon. Just because you have to take it every year doesn’t mean that it cannot be put to good use. We can show you ways to create financial opportunities with your unwanted RMD that optimize your individual retirement plan. Please contact us, if you have any questions. Albert Davidoo and Isavi Certified Public Accountancy Corporation Members of: American Institute of Certified Public Accountants (AICPA) California State Board of Accountancy (818) 501-8866 – telephone (818) 501-8931 – fax
Posted on: Wed, 05 Nov 2014 01:03:20 +0000
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