What Should You Know About Taking RMDs?

Submitted by Edward JonesPrint Story | Email Story

As we get older, the end of another year takes on greater meaning, in many ways, than it did when we were young. And if you're a certain age, Dec. 31 has a very specific meaning in terms of your finances, because it's the deadline for withdrawing money from some of your retirement plans. What should you know about these withdrawals? And how much control over them do you have?

Here's the picture, in a nutshell: Once you turn 70 1/2, you generally need to start taking withdrawals – the technical term is "required minimum distributions," or RMDs – from your traditional IRA and your 401(k) or similar plan, such as a 403(b) plan (for employees of pubic schools, religious institutions and other tax-exempt organizations) or 457(b) plan (for employees of state and local governments and governmental agencies). After the first year in which you take these RMDs, you must take them by the end of each year thereafter.

If you don't withdraw at least the minimum amount (calculated based on your age, account balance and other factors) you face a penalty of 50 percent of what you should have taken out – a potential loss of thousands of dollars. So, here's priority number one: Take your RMDs before the end of the year. The financial services provider who administers your IRA or 401(k) can help you determine the amount you must withdraw.

However, after that point, it's your decision as to whether you want to exceed the minimum. Of course, you may need to take more out to meet your living expenses. But if you have enough additional income from other sources – such as Social Security and interest and dividend payments from investments held outside your retirement accounts – you may be able to stick with the minimum withdrawals.



And this could prove to be beneficial, because you obviously want your retirement accounts to last as long as possible, considering you might spend two or even three decades as a retiree. Another reason not to take more than you need from your retirement accounts is that these withdrawals are typically taxable – so the less you take out, the lower your tax bill.

You can also potentially lower your tax burden arising from RMDs by being generous. If you take money from your IRA and donate it to a qualified charity (one that has received tax-exempt status from the IRS), you can exclude the withdrawal from your adjusted gross income and count the donation against your taxable RMDs. Suppose, for example, your RMD for 2016 is $5,500. If you take $5,000 from your IRA and donate it to a qualified charity, your taxable RMD obligation will be reduced to just $500. If you were to take another $500 from your IRA, you would satisfy your entire RMD for the year. (Consult with your tax advisor to make sure you’re following the rules governing these charitable donations from your IRA.)

You worked many years to build your retirement accounts. So when it's time to tap into them, make the right moves – and do whatever it takes to maximize the benefits you get from your required minimum distributions.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Courtesy of Walter Lother, Financial Advisor, in North Adams, at 413-664-9253. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.

 


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Macksey Updates on Eagle Street Demo and Myriad City Projects

By Tammy DanielsiBerkshires Staff

The back of Moderne Studio in late January. The mayor said the city had begun planning for its removal if the owner could not address the problems. 
NORTH ADAMS, Mass. — The Moderne Studio building is coming down brick by brick on Eagle Street on the city's dime. 
 
Concerns over the failing structure's proximity to its neighbor — just a few feet — means the demolition underway is taking far longer than usual. It's also been delayed somewhat because of recent high winds and weather. 
 
The city had been making plans for the demolition a month ago because of the deterioration of the building, Mayor Jennifer Macksey told the City Council on Tuesday. The project was accelerated after the back of the 150-year-old structure collapsed on March 5
 
Initial estimates for demolition had been $190,000 to $210,000 and included asbestos removal. Those concerns have since been set aside after testing and the mayor believes that the demolition will be lower because it is not a hazardous site.
 
"We also had a lot of contractors who came to look at it for us to not want to touch it because of the proximity to the next building," she said. "Unfortunately time ran out on that property and we did have the building failure. 
 
"And it's an unfortunate situation. I think most of us who have lived here our whole lives and had our pictures taken there and remember being in the window so, you know, we were really hoping the building could be safe."
 
Macksey said the city had tried working with the owner, who could not find a contractor to demolish the building, "so we found one for him."
 
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