Reinvest Your RMD

 

A required minimum distribution (RMD) is the minimum amount the IRS requires you to take out of your retirement accounts after a certain age to avoid a tax penalty. RMDs are determined by dividing the retirement account’s prior year-end fair market value by a life expectancy factor published by the IRS.

For years, the age threshold was 70½, but it was raised to 72 following the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

The RMD age was increased again as part of SECURE 2.0. If you were born:

 

• Between 1951-1959: Your RMD start date is at age 73
• In 1960 or after: Your RMD start date is at age 75

If you're still working at your RMD age and don't own 5% of the company you work at, you may delay taking RMDs from that employer-sponsored 401(k) until you retire, if the plan allows it. (This exemption only applies to your 401(k) at the company where you currently work.)

RMDs are taxable, and you must continue them until you deplete your account. If you don't take your RMDs, there is a 25% penalty on the shortfall.

If you don't necessarily need the money from your RMD to cover living expenses, consider the following strategies:

1.      Reinvest Your RMDs

If you don’t need your RMD for day-to-day living expenses, you can transfer your RMD amount from your retirement account to an after-tax account and then re-invest according to a strategy that fits your needs. The after-tax accounts remain available to you throughout your life and do not have any withdrawal requirements.

2.      Use RMDs to donate to charity

Qualified charitable distributions (QCDs) are distributions of taxable assets from traditional or beneficiary Roth IRAs that are paid to qualified charities and are tax-free for eligible IRA owners. The Consolidated Appropriations Act made QCD provisions permanent within calendar year 2017 and going forward.

• For eligible tax years, individuals age 70½ or over can exclude up to $105,000 (for 2024) from gross income for donations paid directly to a qualified charity from their IRA.
• The donation satisfies any IRA required minimum distributions for the year.
• Donations from an inherited IRA are eligible if the beneficiary is at least age 70½.

3.      Give the gift of education

Invest in your grandchild’s or loved one's future by using RMD funds to contribute to a 529 college savings plan or add to one that’s already been established. Your RMD gift will grow tax-deferred and withdrawals for qualifying education expenses are tax free. 

4.      Increase your retirement contributions

 For those who have RMDs from Inherited IRAs and are still eligible to make retirement contributions, you might be able to offset the additional taxes of inherited IRA withdrawals by increasing contributions to your own retirement accounts. If you are participating in a 401(k) or 403(b), you can increase your contributions, while utilizing the RMD to cover the reduction in your paycheck. 

You may also be able to contribute to a traditional IRA if your income qualifies, or a SEP-IRA or Simple IRA if you’re self-employed.

We are happy to talk with you and review your current needs and help guide you on a decision with your RMD, don’t hesitate to call our office at (518) 584-2555 with any questions or to schedule a meeting. 

 

Final Inherited IRA RMD Ruling

 

The IRS has recently released the long-awaited final rules regarding inherited IRAs. Even though these updated rules were expected and don’t start until year 2025, they do include significant changes regarding RMDs that will impact many beneficiaries. 

To read the final ruling in simple terms, click here to read “Final IRS Regulations Issued On Inherited IRAs, RMDs, SECURE Act”

Our office has been monitoring these changes and happy to see a final regulation is now in place. We are here to help as these regulations are rolled out and available for any questions at (518) 584-2555.

 

Midyear Outlook: Still Waiting for the Turn

As we reach the halfway point of 2024, a sense of persistence defines the economic and market landscape. Trends from late 2023 have continued, with surprisingly resilient economic growth mixed with stubborn but decelerating inflation.

Equity markets have thrived and regained all the lost ground from 2022. On the other hand, the bond market still grapples with policy uncertainty and remains range bound for the most part.

LPL Research created their midyear outlook titled, Still Waiting for the Turn that provides their educated predictions on the remainder of 2024. The outlook foreshadows the following: Economy, Stocks, Bonds, U.S. Election, Geopolitics, Commodities, Currencies and Alternative Investments. 

 

Did You Know: Data from Still Waiting for the Turn

• The current Fed interest rate pause, at 331 days, is the second-longest in modern market history, trailing only 2006–07 (446 days), while the average of the six pauses since 1989 — has spanned 248 days.
• On average, in a given year, the S&P 500 Index experiences three pullbacks (5-10%) and one 10-20% correction. The average maximum drawdown in a positive year, which 2024 will likely be, is 11%. So far in 2024, the maximum drawdown for the index has been just 5.5%, suggesting more volatility may be coming.
• During election years between July and November since 1950, the S&P 500 has exhibited an average annualized volatility of nearly 25%.

 

Summer Fun in Congress Park 

Congress Park is one of the most historic parts within downtown Saratoga Springs. You are able to find staples like the early mineral springs, famous Canfield Casino and indoor Carousel.

But this month, Tuesdays at Congress Park offers free fun for all ages. From 10am to 4pm you can attend the 3rd Annual Congress Park Vendor & Craft Festival.

Then on Tuesday nights you can enjoy the free Summer Concert Series in Congress Park.

Click here to take a look at more summer fun happening right here in Saratoga Springs.