Mistake: Not planning In Advance
Taking a significant required minimum distribution could push some of your finances into a higher tax bracket and have a ripple effect on other areas of your finances. But with a little planning, you can reduce the amount of cash you have to withdraw.
Converting some of your money from traditional IRAs to a Roth IRA over a couple of years can give you better control over the tax bracket.
For instance, converting a part of it would put you at the top of your tax bracket beginning several years before you turn 70 and a half, so you’ll have to remove less money when taking your RMDs.
Conversions made after 70 and a half won’t decrease your required distribution the year you convert. You must take your RMD for the year before you make the conversion. But they’ll impact your future RMDs.
You can also reduce your RMDs by rolling over some money into a qualified longevity annuity contract. You can now invest up to 25% of your IRA account balance in these annuities without taking RMDs on that money.
Leave a Reply