Emergency Fund, Investing, Retirement, Saving
March 11, 2021
If you are at least 72 years old, or love someone who is, 2021 brings us the return of the RMD.
Last year in the heat of the sharp and fast bear market, the government told retirees they did not have to take their annual required minimum distribution (RMD) from their traditional 401(k) and traditional Individual Retirement Accounts (IRA).
They’re now back in play. If you are at least 72 (or you were at least 70 ½ by the end of 2019) you are required to take annual RMDs from your tax-deferred retirement accounts.
This is one tax requirement you don’t want to mess with. Failure to take an RMD can result in a 50% penalty tax on the amount you were supposed to withdraw.
If you have previously taken RMDs, it wouldn’t hurt to circle back to those accounts and confirm you are once again scheduled to receive an RMD this year. (You can also receive it monthly if you prefer.) If this is your inaugural RMD year, the brokerage or retirement plan that handles your accounts can tell you what your RMD is, and you can decide when you want it zapped to your bank account.
If you don’t need the RMD for regular household expenses, you still must take the distribution. But that doesn’t mean you must spend it.
How to use an RMD
If you don’t need the money for living expenses, let’s review some uses for the money:
Newly Revised & Updated for 2023! Retirement today is more complex than ever before. It is most definitely not your parents' retirement. You will have...
Investing, Family & Estate Planning
Credit & Debt, Saving, Investing, Retirement