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Five FAQs about Required Minimum Distributions (RMD)

March 29, 2022

What is the best time to start taking RMDs? Should you take RMDs monthly, quarterly or annually? We answer this and more here.

If you are celebrating your 72nd birthday in 2022 and have traditional IRA accounts, you will want to read up on some FAQs and answers regarding your RMD requirements.

5 FAQs

  1. When is the best time to start taking money from my retirement accounts?
    Anyone whose 70th birthday falls on or after July 1, 2019 has until age 72 to take his/her first RMD. If this applies to you, you have as late as April 1 of the year following the year you turn 72 to take your first RMD. For each year thereafter, the RMD must be made annually by December 31st. If you delay your first RMD until the following year [and prior to April 1], you will need to take two RMDs in that year. For example, you turn 72 in June of 2022. You may delay your first RMD to March 31, 2023, however, you will need to take a second RMD by 12/31/2023. You may also take money out of your retirement accounts penalty free after you reach age 59 ½.
  2. What if I do not need the RMD money to live on – are there any planning options?
    Yes, you have a few different options. You can opt to donate all, or a portion of your RMD directly to charity through what’s called a Qualified Charitable Distribution, or QCD. A QCD can help you lower your taxable income and benefit the charities of your choice, because it does not have to be included in your income. It is considered an “above the line deduction” meaning that it is a reduction to your gross income as opposed to a potentially limited itemized deduction. You can donate up to $100,000 per spouse directly from your IRA's subject to certain limitations.

    Another option is using the RMD to purchase long-term care (LTC) insurance, which covers expenses associated with chronic illnesses, disabilities and other conditions. It generally covers home care, assisted living, adult daycare, nursing home and Alzheimer’s facilities.

    Lastly, you might consider reinvesting the money in taxable accounts. This includes deposit accounts, taxable brokerage accounts and municipal bonds.

    CTA - RMD
  3. What is the best way to take my RMD?
    There are benefits to taking the RMD monthly, quarterly or annually, the important thing is making sure you withdraw the total amount by the deadline. Your money has more time to grow tax deferred if you wait until year end, but some people prefer to get it out of the way early in the year to make sure it gets done. Others like monthly distributions for the regular cash flow. You can take your annual RMD in a lump sum or in monthly or quarterly payments. You should also look at what the market is doing at the time you take your RMD and analyze whether you should take the RMD from your stock or bond portfolio, or a combination, thereof.
  4. How do I choose among multiple accounts where I should take my RMD from?
    It depends. Traditional IRA owners are required to calculate the RMD separately for each IRA that they own. However, they can withdraw the total RMD amount from one or more of the IRAs. RMDs from other types of retirement plans, including 401(k) and 457(b) plans, must be taken separately from each account. The underlying investments in each account and the market conditions at the time of withdrawal may drive the decision on which account to withdraw the RMD from.
  5. Are there times when I should take more than my RMD?
    Yes, in a low taxable income year, it may make sense to take more than required. Bear in mind that a distribution in excess of the RMD for one year cannot be applied to the RMD for a future year.

Your personal financial circumstances and cash flow needs should be considered when deciding to take more than the RMD in any given year.

Questions? We can help. Reach out to us.

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