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Are You Taking Advantage of Your RMD?

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You know that if you’re over 70 1/2, and have a tax deferred account, this is the time of year that the IRS required minimum distribution (RMD) can sneak up on you. I’ve already had a number of conversations over the last few weeks with clients of our money management business.  (Even if you’re not a client, you can sign up here for our free monthly client letter). You don’t want to wait until the last minute to discuss your RMD. This piece should help you as you ponder your options.

You saved for years to get to retirement—contributing to a traditional 401(k) or IRA. Now it’s time to dip into those savings—even if you don’t really need to. Because you got a tax break when you contributed to these accounts, once you turn age 70½ the IRS requires you to withdraw every year from your traditional IRA or employer-sponsored retirement plan account, such as a 401(k) or 403(b), and start paying taxes on that money.1 It’s important to determine how these minimum required distributions—known as MRDs or RMDs (required minimum distributions)—fit into your retirement income plan.

“Making the best use of your MRDs can help avoid costly mistakes. If you don’t absolutely need that money for living expenses, you can make some decisions about the best way to use it,” says Ken Hevert, Fidelity senior vice president of retirement products.

You do have some flexibility on timing and what to do with the money. For instance, if you don’t need it for living expenses, you may want to give it to your heirs, donate it to a charity, or reinvest it.

Ask Fidelity: Taking Your First MRD | Fidelity

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E.J. Smith

Editor-in-Chief
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com.