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 72, 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 72, 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
CONTACT US to schedule a complimentary review session with an advisor!
DISCLOSURE: The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. You should discuss any legal, tax or financial matters with the appropriate professional. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. An exchange-traded fund (ETF) is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. Investors cannot invest directly in an index. Municipal bonds are debt securities issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, especially if the investor lives in the state in which the bond is issued. The municipal market can be adversely affected by tax, legislative or political changes and the financial condition of the issuers of municipal securities. Investing in municipal bonds for the purpose of generating tax-exempt income may not be appropriate for investors in all tax brackets or for all account types. Tax laws are subject to change and the preferential tax treatment of municipal bond interest income may be revoked or phased out for investors at certain income levels. You should consult your tax adviser regarding your specific situation. Investments in high yield bonds entail higher risks, including greater credit risks. Their NAVs are sensitive to interest rate movements (a rise in interest rates can result in a decline in value of the investment). Tax or legal services are not offered through, or supervised by, The Lincoln Investment Companies.