3 Ways to Reduce Your Required Minimum Distribution (RMD) and Pay Less in Taxes
Saving money for retirement in a 401(k) or IRA comes with some big tax advantages. Any money you contribute to the account is tax deductible. On top of that, you won't pay any taxes on gains or dividends earned in the account. That can give you a lot more money to invest today and help you reach your retirement goals faster.But eventually the government wants its tax revenue. That's why it imposes required minimum distributions, or RMDs, on those accounts starting when you reach age 73. At that point, you'll have to start taking withdrawals from your retirement accounts and paying income taxes on the amount. If you inherited an IRA from someone else, you might also have to take RMDs from that account.If the government requires you to take a bigger RMD than you actually need for living expenses, it can have a serious impact on your finances. Not only do you lose the tax advantages of keeping your savings in an IRA or 401(k), but you'll also find your tax bill ballooning. As such, it often pays to take actions that can lower your RMD both this year and in the future. Here are three ways to do exactly that.Continue reading
Saving money for retirement in a 401(k) or IRA comes with some big tax advantages. Any money you contribute to the account is tax deductible. On top of that, you won't pay any taxes on gains or dividends earned in the account. That can give you a lot more money to invest today and help you reach your retirement goals faster.
But eventually the government wants its tax revenue. That's why it imposes required minimum distributions, or RMDs, on those accounts starting when you reach age 73. At that point, you'll have to start taking withdrawals from your retirement accounts and paying income taxes on the amount. If you inherited an IRA from someone else, you might also have to take RMDs from that account.
If the government requires you to take a bigger RMD than you actually need for living expenses, it can have a serious impact on your finances. Not only do you lose the tax advantages of keeping your savings in an IRA or 401(k), but you'll also find your tax bill ballooning. As such, it often pays to take actions that can lower your RMD both this year and in the future. Here are three ways to do exactly that.
