5 Tactics For Required Minimum Distributions

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So – you’ve reached that magic age, 72 (used to be 70½), and now you’ve got to begin taking the dreaded Required Minimum Distributions (RMDs) from your various retirement accounts. Listed below are a few tactics that you might want to employ as you go through this process. Perhaps one or another will make the process a little less onerous on you.

5 Tactics for Required Minimum Distributions

1.  Take all of your RMDs from your smallest IRA account. If you have several IRA accounts, you can aggregate the amount of your RMD for the year and take it all out of one (in this tactic, the smallest) account. This way you’ll eventually eliminate that account by draining it completely. This will reduce paperwork, time, and error in calculating RMD amounts, as well as limit complications in estate planning.

The same can be done for your 403(b) accounts. You can’t use IRA distributions to make up your 403(b) RMDs or vice versa, however. Each type of account must have its own distributions. This only applies to 403(b) accounts, and not to 401(k) accounts, though: each 401(k) has its own separate RMD, they can’t be aggregated.

Keep in mind though, that distributions from an inherited IRA or inherited 403(b) cannot be used to satisfy the RMD for your other, regular IRAs or 403(b)s, and these inherited accounts can’t be aggregated for RMDs.

2.  Take distributions in kind, rather than in cash. There is no requirement that your RMD must be in cash – so if the situation is advantageous to you, you might consider taking the distribution in stocks, bonds, or any other investments to fulfill the RMD requirement. When the distribution occurs, the value of the investment is considered taxable income to you – and therefore becomes the new basis of that investment.

There are three situations when this type of distribution is particularly useful:

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