Once you reach the minimum distribution (RMD) age required (73), how much do you control the timing, amount, and source of the distribution? Let’s look at each lever.
timing
Retirements will have some control over the start of RMD via the required start date. This is April 1st, following the year he turns 73. Deferring this tax bill for nearly a year might seem like a victory, but you will need to take additional RMDs by the end of the next year. In other words, it is not a good idea to delay the initial RMD.
People over the age of 73 who are still working on a retirement plan and are covered can usually delay RMD from that plan. However, if they have separate retirement accounts (IRAs) from the plan, the RMD is still scheduled from the IRA.
Once RMD is in operation, retirees can take RMD at any time of the year. Some people incorporate them early so they don’t forget, while others make sure they are consistent with other year-end tax plans and charitable contributions until the end of the year.
One common misconception about RMD is that tax bills can be reduced by getting distributions when the market is declining and account balances are low. In fact, the amount of RMD is effectively “cooked” by the end of the previous year. For example, the amount for 2025 RMD is based on your account balance as of the end of the year.
Amount
Investors have a little more control over the amount of RMD, but the biggest opportunity to cut taxes in the year before RMD is the biggest.
Rather than traditional tax-deferred vehicles, it is important to contribute to loss accounts. Years before RMD are the best times to convert traditional IRA balances into losses, at a life stage where people are generally managing taxable incomes significantly.
Accelerating withdrawal from RMD Subject accounts also makes sense in those postwork, the year before RMD, allowing investors to lower the balance of RMD subjects compared to the likelihood that tax rates will be later.
Related Stories
Once RMD is launched, charitable donations are the best way to lower RMD taxes. Creating a qualified Charitable Distribution (QCD) from an IRA is optional once you reach the age of 70½. This helps avoid the normally scheduled taxes if you take RMDs and use them.
Additionally, the amount of QCD fills all or part of the RMD, and also reduces the balance of the RMD subject.
sauce
Retireers have a considerable amount of control in determining which account or holding to obtain an RMD. Strategic RMD-Taking does not reduce taxes caused by distribution, but can help you remove risk from your portfolio or achieve other investment objectives.
For example, let’s say you have 10 holdings in your IRA and have a combination of US and non-US stocks, bonds and cash. As long as you subtract the appropriate amount from the IRA for RMD, you can apply your investment strategy and decide where to go to withdraw. For example, after a stock market gathering, I might want to withdraw all my RMDs from US stocks to reduce the risk of my portfolio.
Retirements with multiple IRA accounts can also focus their RMD take on specific accounts. Let’s say you have two IRA accounts. One is a smaller IRA that holds an index mutual fund and has individual stockholdings. If necessary, you can acquire all of the 2025 RMDs from your account using individual shareholdings and leave your fund portfolio intact. The key is to take the right amount from the IRA, not where you go for them.
However, there are important caveats here. This means that if you have RMD Subject accounts of different types (e.g. IRA, 401(k)), you will need to calculate the RMD amount for each account individually and get the RMD from each account.
By Christine Benz of Morning Star
The views and opinions expressed are those of the author. They are for general informational purposes only and should not be interpreted or interpreted as recommendations or solicitations. Epoch Times does not provide investments, taxes, legal, financial planning, real estate planning, or other personal financial advice. Epoch Times is not responsible for the accuracy or timeliness of the information provided.
