Review: How to put your RMD to work (and avoid a 50% penalty)

It’s getting toward the end of the year, and that means all sorts of things. Mainly it means that it’s time to make sure you have all your financial ducks in a row (and we get to read articles like this one).

In the grand scheme of things, making sure you take your required minimum distributions from your non-Roth IRAs isn’t that difficult – it’s mainly a memory test. But the penalty for forgetting is pretty steep – half of whatever you don’t take out.

If your RMD is $10,000 and you don’t take out anything, you’ll owe the IRS $5,000. The money in your IRA wasn’t taxed before being saved, so the IRS is going to make sure they get their cut.

Even if you don’t need all of your RMD, you still need to take it all out, and it doesn’t have to go to waste. The IRS just wants the money out of your IRA so they can get to it – they don’t care what you do with it after that. You can reinvest it in a traditional brokerage account, donate it to charity, or whatever else you want.

Making sure you take your RMDs, like a lot of things in financial planning, is just about paying attention to the details. And depending on your situation, there are a lot of specific dates you have to take care of specific financial matters by. That’s one of the ways a financial advisor saves you money.

If you want to know more about how we can help you, read our ebook What McLean Can Do For You


 

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