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Understanding your Required Minimum Distributions (RMDs) at age 73: what comes next?

Updated: Apr 19


Required Minimum Distributions (RMDs) are mandated withdrawals from qualified retirement plans and play a crucial part of your financial plan.

Once you've reached a certain age, it's imperative to understand not only the necessity of these distributions but also the options you have after receiving them. Understanding RMDs: Required Minimum Distributions, or RMDs, are withdrawals that individuals must take from their qualified retirement accounts such as IRAs, 401(k)s, and inherited IRAs once they reach a specific age. While the SECURE ACT 2.0 raised the age to 73 for 2023, the next few years will continue to see changes to this age requirement. Failure to comply with RMD rules may result in hefty penalties.

Three Options We Discuss With Clients: After receiving your RMD, you find yourself at a financial crossroads. Here are three options to consider:

1. Reinvesting and Tax Considerations One prudent option is to reinvest the distribution. However, be mindful of tax implications. Taxes are typically due on the distributed amount, so ensure you allocate funds for this. Reinvesting can potentially grow your nest egg further.

2. Generosity through Charitable Giving and Gifting

Another option is to consider a Qualified Charitable Distribution (QCD). This involves gifting your RMD directly to a qualified nonprofit organization. This not only supports a cause you believe in but can also have potential tax benefits. If you're inclined towards supporting your family, gifting a portion of your RMD could be a meaningful choice. Keep in mind the gift tax exemption limits, which as of my last update, allows for a certain amount to be gifted annually without incurring gift tax.

3. Spend it!

Lastly, there's the option of embracing the fruits of your labor. After a lifetime of diligent saving, it's perfectly valid to allocate your RMD towards personal enjoyment. Whether it's a long-awaited vacation, a special hobby, or simply relishing in the comforts that your savings have provided, it's your hard-earned money, and enjoying it is just as important as any other financial consideration.

Required Minimum Distributions mark an important milestone in your retirement journey. While they represent a mandated financial obligation, they also offer an opportunity to make meaningful choices about how you utilize your savings. Whether you choose to reinvest, give to charity, or simply indulge in life's pleasures, the decision is ultimately yours. Remember, this is your time to savor the fruits of your labor.

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Full Circle Financial Planning

4112 South Cedar Street

Lansing, MI 48910

email: info@fullcirclefp.com

phone: 517-220-2155

text: 517-225-2570

fax: 517-481-2267

Meetings by appointment in Shelby Township, MI 48316

Securities offered through Sigma Financial Corporation, member (finra.org)FINRA/ (sipc.org)SIPC. Investment advisory services offered through Sigma Planning Corporation, a registered investment advisor.

Full Circle Financial Planning is independent of Sigma Financial Corporation and SPC.

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