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More flexibility in planning retirement income – The word “required” in the phrase “minimum distributions required” means exactly what it sounds like – you need to take at least that amount. If you withdraw less than your RMD, the amount not withdrawn will be taxed at 50%. So, in a sense, your RMDs deprive you of some of your freedom in managing your retirement income. But now, with the lower RMDs in place, you can regain some of that flexibility. (And keep in mind that you are always free to withdraw more than RMD.)
Of course, if you don’t really need all of the RMD money, even the smallest amount can be a problem for you – as mentioned above, RMDs are generally taxable. However, if you are 70 1/2 years or older, you can transfer up to $ 100,000 per year from a Traditional IRA directly to a qualified charity, and some, or perhaps all, of that. money can come from your RMD. By doing so, you can exclude RMD from your taxable income. Before taking this step, however, you will want to consult your tax advisor.
Here are a few final points to keep in mind. First, not all of your retirement accounts are subject to RMD. You can usually keep your Roth IRA intact for as long as you want. However, your Roth 401 (k) is usually subject to RMDs. If you are still working past 72, you may be able to avoid taking RMDs from your current employer’s 401 (k) plan or a similar plan, although you will still need to take them from your traditional IRA.