The Individual Retirement Account (IRA) is a retirement savings pillar for countless Americans. As you reach age 70 ½, tax laws force you to withdraw a minimum amount from your IRA each year. This is called a Required Minimum Distribution (RMD). Many retirees don’t actually need their RMD to maintain their current lifestyle and if given the choice wouldn’t even take this withdrawal. Just because you don’t need this money now doesn’t mean you can’t use it to secure your legacy in the future.
If you have reached RMD age, you’ve also reached the age limit for making contributions to any account that is considered to be a retirement account.
This means RMDs can’t be easily reinvested into tax beneficial accounts. Taking your RMD out of one IRA and putting it right back in to another one is prohibited. However, there is a way to reposition your RMD into a tax efficient strategy that will help significantly increase the amount of assets that you are able to leave to your family, friends, or favorite charity.
With proper planning, distributions from an IRA can be positioned to help manage your tax liability and maximize your estate. Reallocating your RMD’s will make your retirement strategy even more efficient, all while avoiding hefty estate taxes.