Beginning the year you turn 70 ½, Uncle Sam requires you to take a minimum distribution from your IRA accounts and retirement plans if you are no longer working. Some people dread that milestone because it adds money to their taxable income. I look at it like a special occasion where you should break out the good scotch to celebrate.
An RMD can be a great opportunity to help leave a legacy or fulfill charitable goals. Using an RMD to help fund a life insurance policy can be an excellent strategy to transfer wealth to future generations in a more tax efficient manner. If you are looking to avoid current income taxes and help charitable causes, you can take advantage of the Qualified Charitable Distribution (QCD) that allows you to pay money to a charity directly from your IRA and exclude the distribution from your taxable income subject to certain rules.
Work with a financial advisor who works on your behalf with your estate attorney and CPA to coordinate an efficient IRA distribution strategy that aligns with your most important goals. Save the celebratory scotch (I recommend Balvenie Double Wood and Laphroaig) for the end of the planning!
For more information on RMDs - https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
For more information on QCDs - https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals
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