As most know, once a person hits 72, the IRS requires you to take a certain minimum amount from your IRA each year. Many do take only the minimum, believing that this will leave more assets to grow tax deferred. However, recent tax changes are a reason to revisit one’s IRA distribution strategy and ask, “Should I withdraw more than RMD?” Beck & Lenox Estate Planning & Elder Law, LLC, offers the following article as food for thought.
MSN’s article entitled “Should You Take an Extra Big RMD This Year?” says that some people, worried about a higher tax bill this year, may want to only withdraw the bare minimum of their required minimum distribution (RMD). At the same time, others seek to find a broader tax strategy.
Those people may want to consider going big with their RMDs. Let’s look the wisdom of taking more than the required minimum distribution from your IRA.
The article gives us four considerations to help with your RMD decision about possibly taking more than the IRA RMD in any year:
- Your tax bracket. Determine the amount of additional income you can recognize this year, while still staying within your current tax bracket. Taxpayers in the 10% and 12% tax brackets should be especially cognizant of maximizing ordinary income in these relatively low tax brackets.
- Your income. See what your income’s projected to be next year and consider whether you (or you and your spouse) will have other sources of income in future years, such as an inherited IRA, spouse’s IRA RMD or annuity income to add to the mix.
- Your beneficiaries. Look at the way in which your current tax rate compares with the tax rates of your IRA beneficiaries. If you have a large IRA and children with high incomes of their own, your heirs could be pushed into a much higher tax bracket when they start their inherited IRA distributions.
- Your Medicare premiums. An increase in income can also result in higher Medicare Part B & D premiums in coming years. As a result, consider this in the context of total savings.
Your financial advisor and your estate planning attorney can likely offer guidance on this topic and help you with the question, “Should I withdraw more than RMD?” If you do not have experienced professionals to discuss this with, Beck & Lenox can provide some guidance.
Reference: MSN (Nov. 23, 2021) “Should You Take an Extra Big RMD This Year?”