3 Ways to Use Your Required Minimum Distribution (RMD) Strategically in Retirement
Maximize your retirement savings and minimize your taxes with these strategies.
Saving for retirement in an IRA or 401(k) comes with a big advantage. Any contributions you make are tax deductible in the year you make them. On top of that, you don't pay any taxes on your investments until you withdraw money from your accounts. Those tax advantages make retirement accounts a great way to build your retirement savings throughout your career.
But you can't avoid taxes forever. Eventually, the IRS comes asking for its piece of the pie by imposing required distributions from your tax-advantaged retirement accounts. Anyone age 73 or older must take a required minimum distribution, or RMD, from their accounts by the end of the year. Failing to take an RMD on time comes with stiff penalties of up to 25% of the amount you were required to withdraw. Even beneficiaries holding an inherited IRA could be subject to RMDs.
But if you saved a lot of money for retirement and you're now facing a bigger required minimum distribution than you actually need for living expenses, you may be wondering how to handle it. Here are three ways to strategically use your RMD to maximize your retirement savings and minimize your taxes in retirement.
