SHOW NOTES: 2018-11-08 MiM

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Last Week’s Question of the Week: What is the earliest that anyone who QUALIFIES for a social security benefit can begin taking their benefit? ANSWER: Age 62.

HOST: Today’s topics are regarding when a person must take RMD’s and also some charitable giving ideas about them?

KLAAS FINANCIAL: Yes, many of our listeners have heard us talk about what happens when you do turn 70 ½ and you are faced with taking required minimum distributions or RMDs, MRDs etc.

The IRS requires that most owners of IRAs withdraw part of their tax-deferred savings each year, starting at age 70½ (or after inheriting any IRA account). Your required minimum distribution is the minimum amount you must withdraw from your tax-deferred accounts each year beginning after reaching the age of 70 ½.

  • If you withdraw less than your RMD, you may owe a 50% penalty tax on the difference.
  • RMDs are designed to ensure that investments in IRAs don’t grow tax-deferred forever.
  • The rules for when IRA beneficiaries must take RMDs depend in part on the account owner’s age on the date of his or her death.
  • If you inherit a Roth IRA and transfer the assets to an Inherited Roth IRA, unlike the original owner, you must take RMDs. As long as the assets have been in the Roth IRAfor five or more years, these RMDs can be withdrawn federally tax-free.

HOST: So how much are you allowed to take out for your RMD every year and how is a person’s RMD calculated?

KLAAS FINANCIAL: Remember, your required minimum distribution is the minimum amount you must withdraw from your account each year. A couple of things to remember:

  • You can withdraw more than the minimum required amount.
  • Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

How the RMD is calculated: The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner. Go to which, a website hosted by the SEC (Securities & Exchange Commission), to calculate what your RMDs may look like; or go to and type in RMD Worksheet and you can do an easy hand calculation.

HOST: For those people who are needing to take RMDs what can they do with regards to charity?

KLAAS FINANCIAL: This is a great topic to discuss with your financial advisor and your accountant to see if it may make sense in your own situation. Many people are unaware of this opportunity.

One more acronym: QCD = Qualified Charitable Distribution. Beginning at age 70½, you can have all or part of your distribution made directly from your IRA to a qualified charity (up to $100,000 per taxpayer, per year). Unlike conventional RMDs, QCDs aren’t subject to ordinary federal income taxes.

Using a QCD is a tax-savvy strategy that allows you to transfer up to $100,000 per year from your IRA directly to a qualified charity. It is only available to IRAs and individuals who have reached RMD age (70.5).

Any amount processed as a QCD counts toward your RMD requirement and reduces the taxable amount of your IRA distribution. This lowers both your adjusted gross income and taxable income, resulting in a lower overall tax liability.

Remember, you won’t get a charitable deduction, but you will have satisfied your distribution requirement, and you won’t have to pay income taxes on that money.

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Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.