You may not need to use your RMDs, your Required Minimum Distributions, when you are first required to start taking them. Know your investment options for reinvesting them…
What is an RMD?
Once you reach age 73, the IRS generally mandates that you take required minimum distributions, or RMDs, each year from traditional IRAs or employer-sponsored retirement accounts.
Withdrawing RMD Funds
It’s crucial to note that there is a strict deadline. While you may not actually need your RMD funds, you’re still required to withdraw. The IRS penalty for not taking an RMD, or for taking less than the required amount, is a steep 50% of the amount not taken on time. The deadline to take your first RMD is normally April 1st on the year after you turn 73, and December 31st each following year.
Can you reinvest your RMD?
Yes, you can! Here are a few options to consider…
- Reinvest in a tax efficient account to help reduce taxes later
◦ Index Funds or ETFs
◦ Municipal Bonds
- Consider estate planning investments
◦ Set up a trust account
◦ Make charitable contributions
- Find a high-yield bond fund and receive regular distributions
- Transfer funds to a non-retirement account
- Invest in an income producing property
- Consider socially responsible investments to make an impact
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