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All About RMDs · Money In Motion with Klaas Financial

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  Speaker 1: oh eight four four two five, six three seven and
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  Speaker 1: joining us this morning from Klass Financial R CJ class
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  Speaker 1: and Eric Schwartz CJ. How you doing this week? I'm
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  Speaker 1: doing great.
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  Speaker 2: How are you, Sean?
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  Speaker 1: I'm doing absolutely fantastic. Eric, how have you been?
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  Speaker 3: You know, Sean, I'm doing all right. I'm a little
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  Speaker 3: cold today. I just have to complain a little bit.
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  Speaker 1: I think you're I think you're I think you're well
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  Speaker 1: supported in that because I'm the same way and i'm
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  Speaker 1: and I'm a thicker guy, and even I get chilly
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  Speaker 1: in this stuff. I can't imagine for you guys, get that,
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  Speaker 1: get that little little chill and it just doesn't go away.
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  Speaker 1: So nice thing is about we talk about retirement planning.
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  Speaker 1: If you don't like this type of weather, you've got options,
• 1:42
  Speaker 1: And it's all about the importance of planning. And speaking
• 1:44
  Speaker 1: of the importance of planning and kind of understanding retirement planning,
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  Speaker 1: We're going to talk this week about something called r mds,
• 1:50
  Speaker 1: Retired required minimum distributions, What exactly they are, why they
• 1:55
  Speaker 1: are something you need to be aware of, and the
• 1:58
  Speaker 1: effect that they can have. Will get to that conversation
• 2:00
  Speaker 1: with Cjen Eric in just a moment in the meantime,
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  Speaker 1: if you've got a question, love to get you on
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  Speaker 1: Jersey Mike's. Little tip listen closely to the program because
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  Speaker 1: just about every show, the question answer comes up during
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  Speaker 1: on in the program in detail how you can win
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  Speaker 1: And before we start this week's topic and conversation, let's
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  Speaker 1: actually go back to last week's show, actually two weeks
• 2:37
  Speaker 1: ago show a couple of weeks back. I guess be
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  Speaker 1: the better way to say it. Let's get the question
• 2:42
  Speaker 1: and answer there as well.
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  Speaker 3: Eric, Absolutely, it's it's been a little while, but we
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  Speaker 3: covered Medicare in long term care coverage. So our question
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  Speaker 3: from a couple of weeks ago was true or false,
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  Speaker 3: Medicare will cover all associated expenses with long term care.
• 3:00
  Speaker 3: The answer was false, and our winner last week was
• 3:04
  Speaker 3: Olivia from Wanakee. So thank you for listening.
• 3:07
  Speaker 1: A lot of vowels and Olivia from Wanakey of wan
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  Speaker 1: Key as well. Just an observation and that congratulations Olivia
• 3:15
  Speaker 1: and you two can be like Olivia. I just listened
• 3:17
  Speaker 1: closely to the program. We'll tell you how you can
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  Speaker 1: win a little bit later on in the show. Speaking
• 3:21
  Speaker 1: of the show from a couple of weeks ago, it
• 3:23
  Speaker 1: was an in depth, fantastic conversation donever. You can always
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  Speaker 1: listen back at class financial dot com. That's Closs Klaas
• 3:32
  Speaker 1: Financial dot com checking the calendar. Yeah, we're are about
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  Speaker 1: a month, four weeks away from twenty twenty six. We've
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  Speaker 1: just got a couple of weeks, a few weeks left
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  Speaker 1: here in twenty twenty five. CJ. What should we know
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  Speaker 1: about our mds and what needs to be needs to
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  Speaker 1: be understood here?
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  Speaker 2: Well, Sean, I'm still laughing about the there's a lot
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  Speaker 2: of vowels and Olivia from Wanakee. But that's an interesting observation,
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  Speaker 2: I nerdy observation.
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  Speaker 1: Actually, yeah, that's all I get paid.
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  Speaker 2: Okay, got it?
• 4:04
  Speaker 1: Got it all right?
• 4:06
  Speaker 2: Well, yes, So we are talking about rmds today, and
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  Speaker 2: we're definitely in the final stretch of the year, and
• 4:12
  Speaker 2: if you're someone who's required to take an RMD, chances
• 4:17
  Speaker 2: are you've either done it already or you should be
• 4:19
  Speaker 2: reviewing it to make sure that you've withdrawn or will
• 4:22
  Speaker 2: have withdrawn the calculated amount by the end of the year.
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  Speaker 2: Remember that rmds, or required minimum distributions, are the minimum
• 4:30
  Speaker 2: amounts you're required to withdraw each year from certain retirement accounts.
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  Speaker 2: These include traditional irays, SEP irays, simple irays, and employer
• 4:39
  Speaker 2: sponsored plans like four oh one k's and four H
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  Speaker 2: three b's. Now, a little bit later, we'll talk about
• 4:45
  Speaker 2: some exceptions to that, where if you're still working and
• 4:48
  Speaker 2: you're you're over the RMD age, but you're still working
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  Speaker 2: and contributing, there's certain circumstances under which you don't have
• 4:53
  Speaker 2: to pull an RMD. But generally speaking, again, this is
• 4:56
  Speaker 2: the age at which you must take minimum distributions from
• 4:59
  Speaker 2: these retirement accounts. Now, often people will say, well, why
• 5:03
  Speaker 2: do these things exist? This seems silly, And the answer
• 5:06
  Speaker 2: is because the irs doesn't let you defer taxes on
• 5:09
  Speaker 2: retirement savings forever. They want their share of the tax
• 5:13
  Speaker 2: burden eventually. That's where rmds come in. So think of
• 5:16
  Speaker 2: it this way, everybody. When you earn income from your employer,
• 5:21
  Speaker 2: there's payroll taxes, there's income taxes, there's all kinds of
• 5:25
  Speaker 2: things that happen. You then put that into your checking account.
• 5:27
  Speaker 2: You go out and buy something, and you pay a
• 5:30
  Speaker 2: sales tax, and then the person who receives that pays
• 5:33
  Speaker 2: a salary to somebody who pays income tax, and they
• 5:36
  Speaker 2: go out and buy something and pay sales tax. You
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  Speaker 2: get the idea. This is the rotation of dollars. So
• 5:41
  Speaker 2: if you leave dollars inside of the ecosystem of post tax,
• 5:47
  Speaker 2: one dollar might get taxed a thousand times in a year,
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  Speaker 2: which is good for federal government and state and local agencies. If, however,
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  Speaker 2: you remove that out of the ecosystem and you put
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  Speaker 2: it into retirement account for the next thirty forty fifty years,
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  Speaker 2: well that if too much money gets outside of the ecosystem,
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  Speaker 2: then the federal government's state and local agencies literally cannot operate.
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  Speaker 2: So they have to put a cap on that, and
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  Speaker 2: that is where these minimum distribution caps come in. Now,
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  Speaker 2: many people are going, what are you talking about? I'm
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  Speaker 2: going to have to live off of that touche. Most
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  Speaker 2: people have to pull money out of their retirement accounts,
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  Speaker 2: not because they're required to, but rather because they need
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  Speaker 2: it to live off of.
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  Speaker 1: But that's not true for everybody.
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  Speaker 2: Eric, and I probably work with. I don't know, no,
• 6:35
  Speaker 2: Eric fifty sixty seventy combined households that do not need
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  Speaker 2: their required distributions, and if they weren't required to pull them,
• 6:41
  Speaker 2: they wouldn't pull them. They just leave it alone and
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  Speaker 2: leave it to their beneficiaries. Now, this concept of rmds
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  Speaker 2: dates back to the Tax Reform Act of nineteen eighty six,
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  Speaker 2: which originally set the start age at seventy and a half.
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  Speaker 2: Some of you listening remember this quite vividly. It's like, wait,
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  Speaker 2: I thought rmds were seventy and a half. And that
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  Speaker 2: has changed a few times, and most recently, thanks to
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  Speaker 2: the Secure Act, that changed again. And here's the current
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  Speaker 2: breakdown by birth year. If you were born in nineteen
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  Speaker 2: sixty or later, rmds begin at age seventy five. If
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  Speaker 2: you were born between nineteen fifty one and nineteen fifty nine,
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  Speaker 2: rmds begin at age seventy three. If you were before
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  Speaker 2: if you were born in nineteen fifty or before July
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  Speaker 2: first of nineteen forty nine, rmds begin at age seventy two.
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  Speaker 2: And finally, if you were before born before July first
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  Speaker 2: of nineteen forty nine, rmds began at age seventy and
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  Speaker 2: a half. So just know everybody, if you're thinking to yourself,
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  Speaker 2: what I already started rmds and they began, they began
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  Speaker 2: at age seventy and a half. For me, it's not fair. Well,
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  Speaker 2: these are the different ages, and if you actually go
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  Speaker 2: back and look at the legislation of how and why
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  Speaker 2: they implnt to these ages, it's just simply acknowledging that
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  Speaker 2: people are living longer. This is actually a good thing.
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  Speaker 2: The more those ages get pushed back, the more you
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  Speaker 2: can leave money inside of these accounts to grow tax deferred.
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  Speaker 2: This this is a win win. Now, your very first
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  Speaker 2: rm D is actually due by April first of the
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  Speaker 2: year after you reach your required age. After that, you
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  Speaker 2: will need to take your rm ds by December thirty
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  Speaker 2: first annually.
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  Speaker 1: So here's the kicker.
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  Speaker 2: Under most circumstances, you should just take your first RMD
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  Speaker 2: in the age in which you're required to, don't push
• 8:36
  Speaker 2: it off to the following year. Every once in a
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  Speaker 2: while there can be a unique circumstance where deferring your
• 8:43
  Speaker 2: first rm D to the following year and then taking
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  Speaker 2: two rmds in that year could make sense, but it's
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  Speaker 2: only under very unique circumstances. So most of the time,
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  Speaker 2: when you turn RMDA, just make sure you pull the
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  Speaker 2: rm D by the end of the year, and then
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  Speaker 2: every December thirty first thereafter. Now here's another thing that
• 9:01
  Speaker 2: changed recently through the Secure Act. If you missed your RMD,
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  Speaker 2: the penalty used to be pretty stiff at about fifty percent,
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  Speaker 2: and there weren't many exceptions to that, and now through
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  Speaker 2: the Secure Act, that penalty is twenty five percent even
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  Speaker 2: lower as long as you fix that within a certain timeframe.
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  Speaker 2: So what the IRS was realizing is that the i'm
• 9:22
  Speaker 2: the reason somebody missed an RMD was by mistake, not
• 9:25
  Speaker 2: by neglect, And so they just said, hey, let's let's
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  Speaker 2: you know, lessen this a little bit to acknowledge what's happening.
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  Speaker 1: And acknowledging right now that the IRS sounding reasonable there, Hey, listen,
• 9:35
  Speaker 1: next to prime.
• 9:36
  Speaker 2: I know that of me is turning over a new lead.
• 9:40
  Speaker 1: Talking this morning with CJ. Claus and Eric Schwortz our
• 9:43
  Speaker 1: retirement planning professionals from Claus Financial online Class Financial dot com.
• 9:47
  Speaker 1: That's Claus k l a as Financial dot com. They're
• 9:50
  Speaker 1: TOEP number six, So eight four four, two, five, six
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  Speaker 1: three seven, no charge. That initial gets no appoyment at
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  Speaker 1: Class Financial. It will be complimentary to you. So CJ,
• 9:58
  Speaker 1: let's let's kind of break this stuff down. Of course,
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  Speaker 1: RMD those each of those letters very important, aren't they. Yeah.
• 10:06
  Speaker 2: So again we've talked about this on the show quite
• 10:08
  Speaker 2: a bit, but our industry loves its acronyms, and RMD
• 10:12
  Speaker 2: is another example of that. So R stands for required
• 10:17
  Speaker 2: and then the M and D is minimum distribution. Now,
• 10:20
  Speaker 2: every once in a while you'll see those letters kind
• 10:22
  Speaker 2: of like mixed up and it's MRD and this freaks
• 10:25
  Speaker 2: people out. They go, it's an MRD. Well, that's just
• 10:27
  Speaker 2: a minimum required distribution.
• 10:29
  Speaker 1: I mean, you get the idea.
• 10:30
  Speaker 2: MRD RMD at all means the same thing. Now, R
• 10:34
  Speaker 2: is required, so you must take at least that minimum
• 10:39
  Speaker 2: amount annually. You can always choose to take out more,
• 10:43
  Speaker 2: and I'll be frank with you, most of the people,
• 10:46
  Speaker 2: not the Yeah, yeah, most of the people that we
• 10:48
  Speaker 2: work with are already pulling enough out of their retirement
• 10:51
  Speaker 2: accounts by the time they reach these ages to be
• 10:54
  Speaker 2: meeting their minimum distribution requirements. Right, So think of it.
• 10:57
  Speaker 2: I get into retirement, I'm sixty five years old, I
• 10:59
  Speaker 2: start pulling five percent per year out of my IRA.
• 11:03
  Speaker 2: I then, you know, eight years later, turned seventy three,
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  Speaker 2: when my rmds kick on, I'm already pulling enough to
• 11:09
  Speaker 2: meet that minimum distribution. So you get the idea. For
• 11:13
  Speaker 2: many people, this is like a non issue because they're
• 11:15
  Speaker 2: already living off of that money. But if you're not,
• 11:17
  Speaker 2: then you have to start taking it at that time.
• 11:20
  Speaker 2: And just remember rmds now also can apply to different
• 11:24
  Speaker 2: types of certain WROTH accounts if well, well, they don't
• 11:28
  Speaker 2: generally apply if it's your wrath account, unless it's an
• 11:31
  Speaker 2: inherited wroth account. But this gets really confusing, not to
• 11:35
  Speaker 2: mention you can actually have post tax money inside of
• 11:39
  Speaker 2: a pre tax retirement account. So I don't even want
• 11:43
  Speaker 2: to get into the complexity of how this all works out.
• 11:45
  Speaker 2: But what you should know again is that you're going
• 11:48
  Speaker 2: to want to talk to your financial advisor if you're
• 11:50
  Speaker 2: not certain about needing to pull an RMD, because you
• 11:53
  Speaker 2: want to get this taken care of before the end
• 11:54
  Speaker 2: of the year.
• 11:55
  Speaker 1: But it's it's it seems very complicated, and obviously there's
• 11:59
  Speaker 1: a lot to it. I'm always thankful CJ are good
• 12:01
  Speaker 1: at breaking this stuff down to kind of give it,
• 12:04
  Speaker 1: give it something they kind of tangibly understand, because as
• 12:07
  Speaker 1: we as I kind of look over the notes, I'm like,
• 12:09
  Speaker 1: oh my goodness, this is this is just bonkers and
• 12:11
  Speaker 1: what a great what a great explanation. And by the way,
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• 12:44
  Speaker 1: love the great information again that available to you right
• 12:47
  Speaker 1: at class financial dot com. We'll talk about how the
• 12:50
  Speaker 1: r md that number is actually calculated. Also some of
• 12:53
  Speaker 1: the other areas that you need to know, as far
• 12:55
  Speaker 1: as subtleties about rmds, we'll get those details next as
• 12:59
  Speaker 1: Money in Motion with Lost Financial continues right here on
• 13:01
  Speaker 1: thirteen ten. WU I B I talking this week with CJ.
• 13:04
  Speaker 1: Closs and Eric Schwartz. Of course they are our retirement
• 13:06
  Speaker 1: planning professionals from Class Financial the website class financial dot com.
• 13:10
  Speaker 1: That's COSS k l a A S Financial dot com.
• 13:13
  Speaker 1: Tell forh number six oh eight four four two five
• 13:16
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• 13:18
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• 13:21
  Speaker 1: to you.
• 13:22
  Speaker 2: Again.
• 13:22
  Speaker 1: They're number six oh eight four four two five six
• 13:25
  Speaker 1: three seven talking this week about our mds and all
• 13:28
  Speaker 1: about all about r m d's everything that we need
• 13:32
  Speaker 1: to know. And CJ did a fantastic job explaining kind
• 13:36
  Speaker 1: of the basics of the history and what they are
• 13:38
  Speaker 1: and why they are. Eric will bring you in on
• 13:41
  Speaker 1: this conversation. And I think a lot of people are
• 13:43
  Speaker 1: wondering then okay, we understand what they are and why
• 13:45
  Speaker 1: they are, but how are they like calculated? Where's that
• 13:48
  Speaker 1: number coming from.
• 13:50
  Speaker 3: That's a great question, and in many cases the million
• 13:53
  Speaker 3: dollar question for clients. The amount that you have to
• 13:58
  Speaker 3: withdraw is it's calculated by dividing the balance of your
• 14:01
  Speaker 3: account as of December thirty first of the previous year
• 14:05
  Speaker 3: by a life expectancy factor that the IRS gives us.
• 14:08
  Speaker 3: So the hard part is we can't actually tell people
• 14:10
  Speaker 3: before the end of the year how much their RMD
• 14:12
  Speaker 3: will be. We can, we can estimate it, but we
• 14:14
  Speaker 3: need to know that December thirty first balance before we
• 14:17
  Speaker 3: can fully calculate it. So, just to give an example here,
• 14:21
  Speaker 3: I think it helps folks a little bit. For those
• 14:23
  Speaker 3: people taking their first RMD at seventy three that CJ
• 14:26
  Speaker 3: was talking about earlier, their life expectancy factor that the
• 14:30
  Speaker 3: IRS provides is twenty six point five. Okay, so their
• 14:34
  Speaker 3: December thirty first balance gets divided by twenty six point
• 14:38
  Speaker 3: five to come up with their RMD. So that works
• 14:41
  Speaker 3: out to about three point eight percent of your account
• 14:44
  Speaker 3: balance in your first year, and then each year going
• 14:47
  Speaker 3: forward that life expectancy factor drops, so the percentage that
• 14:51
  Speaker 3: you actually draw out. It increases a little bit, ever
• 14:55
  Speaker 3: so slowly each each year going forward. Now, if you
• 14:59
  Speaker 3: are married in your spouse is your soul beneficiary and
• 15:02
  Speaker 3: they're more than ten years younger than you, there is
• 15:04
  Speaker 3: a separate table just for you. We won't get into
• 15:07
  Speaker 3: the details of that, but that is just sort of
• 15:09
  Speaker 3: a one off of the calculation for your RMD. Most
• 15:14
  Speaker 3: custodians will send you a reminder in generally in January
• 15:17
  Speaker 3: or February letting you know what your RMD amount is
• 15:21
  Speaker 3: for the for the year. Not to toot our own
• 15:25
  Speaker 3: horns as advisors, but if you work with a good
• 15:28
  Speaker 3: financial advisor, they are they will be paying attention to
• 15:32
  Speaker 3: this for you. I think CJ and I understand, especially
• 15:36
  Speaker 3: as we get close to the end of the year,
• 15:38
  Speaker 3: ourselves and our advisory team are reviewing all of the
• 15:43
  Speaker 3: clients that we work with to make sure that they've
• 15:45
  Speaker 3: actually addressed their their RMD. So make sure that you
• 15:49
  Speaker 3: are are either paying really close attention to this yourself
• 15:53
  Speaker 3: or you're working with somebody who can help you do that. Now,
• 15:56
  Speaker 3: keep in mind, once you take that required minimum distribution
• 15:59
  Speaker 3: and hey, the taxes, the rs doesn't care what you
• 16:02
  Speaker 3: do with the funds after that. You can reinvest that
• 16:04
  Speaker 3: into an investment account, you can spend it, you can
• 16:07
  Speaker 3: put it in the bank. They just want to make
• 16:10
  Speaker 3: sure that it goes through, goes or well comes out
• 16:13
  Speaker 3: of your account and goes into the tax system. As
• 16:15
  Speaker 3: CJ was referencing earlier, one really important factor here that
• 16:20
  Speaker 3: we get asked a lot. You are not able to
• 16:23
  Speaker 3: take your r m D funds and convert them into
• 16:26
  Speaker 3: a roth ira. Okay, so that is the one thing
• 16:28
  Speaker 3: that the IRS says you cannot do. When you take
• 16:30
  Speaker 3: those those rm D funds out of your pre tax
• 16:33
  Speaker 3: retirement account, you cannot turn around and convert those into
• 16:38
  Speaker 3: a roth ira. And if you want to get an
• 16:40
  Speaker 3: estimate for future rm ds, I know I did a
• 16:43
  Speaker 3: quick calculation there. You can go over to investor dot gov.
• 16:47
  Speaker 3: It has a help really helpful calculator and a I
• 16:51
  Speaker 3: think they called the look up your rm D worksheet
• 16:54
  Speaker 3: that's at IRS dot gov as well. That's a little
• 16:56
  Speaker 3: bit more of a DIY approach, but that'll give you
• 16:59
  Speaker 3: more information as well.
• 17:00
  Speaker 1: Worksheets are always fun, Eric, nothing more fun. Shana talking
• 17:06
  Speaker 1: this morning with Eric Swartz and CJ. Closs every retirement
• 17:08
  Speaker 1: planning professionals from Class Financial online, Class Financial dot com.
• 17:12
  Speaker 1: That's Closs k l AA S Financial dot Com. They're
• 17:15
  Speaker 1: telephone number six so eight four four two five six
• 17:18
  Speaker 1: three seven. So Eric, what do rmds have to do
• 17:20
  Speaker 1: with as we look at this time of year, especially
• 17:22
  Speaker 1: charitable giving, and this is something folks should should be
• 17:25
  Speaker 1: thinking about.
• 17:27
  Speaker 3: Yeah, this has become really popular since the standard deduction
• 17:32
  Speaker 3: was increased so much back in twenty eighteen. It made
• 17:35
  Speaker 3: it difficult for people to actually itemize on their income
• 17:38
  Speaker 3: taxes and actually get tax credit so to speak, for
• 17:42
  Speaker 3: those charitable gifts they're doing. So what's become really popular
• 17:45
  Speaker 3: is something called a QCD or a qualified charitable distribution.
• 17:50
  Speaker 3: And as a reminder, we we always make this disclaimer
• 17:53
  Speaker 3: we are not tax professionals, so make sure you check
• 17:56
  Speaker 3: in with your accountant to see if this makes sense
• 17:58
  Speaker 3: for your situation. We're going to talk through how qcds
• 18:01
  Speaker 3: work and how people use them in conjunction with their
• 18:05
  Speaker 3: their requirementium distributions. So qcds are available to you when
• 18:10
  Speaker 3: you are at least seventy and a half or older.
• 18:13
  Speaker 3: So remember cj I said earlier that rmds used to
• 18:16
  Speaker 3: start at seventy and a half. Now they are up
• 18:19
  Speaker 3: to either seventy three or seventy five. And qcds were
• 18:24
  Speaker 3: originally meant to work with your RMD at age seventy
• 18:27
  Speaker 3: and a half. When they've changed the laws multiple times
• 18:31
  Speaker 3: in recent years, they did not move the QCD eligibility age,
• 18:34
  Speaker 3: so it stay at it's stayed at seventy and a
• 18:36
  Speaker 3: half in basically to be able to qualify for a QCD.
• 18:42
  Speaker 3: What this does is it allows you to transfer up
• 18:44
  Speaker 3: to one hundred and eight thousand dollars directly from your
• 18:48
  Speaker 3: IRA to a qualified charity. Okay, and that's per person.
• 18:51
  Speaker 3: So if you have a married couple, you can potentially
• 18:53
  Speaker 3: transfer up to two hundred and sixteen thousand dollars tax
• 18:58
  Speaker 3: free to a charitable organization. And that number can change
• 19:01
  Speaker 3: a little bit each year. Those are our twenty twenty
• 19:05
  Speaker 3: five numbers. Now, a QCD will actually count towards your
• 19:09
  Speaker 3: rm D for the year. Okay, So let's say your
• 19:12
  Speaker 3: rm D is twenty thousand dollars. If you do five
• 19:15
  Speaker 3: thousand dollars of qcds, you only need to take out
• 19:18
  Speaker 3: fifteen thousand dollars taxable from your RMD, and the amount
• 19:23
  Speaker 3: that you give to the charitable organization does not get
• 19:27
  Speaker 3: included in your taxable income, so you are reducing your
• 19:30
  Speaker 3: overall tax bill and you're helping a good cause. In
• 19:34
  Speaker 3: many cases, maybe just the same giving you've been doing
• 19:37
  Speaker 3: for years, but now you're doing it in a little
• 19:38
  Speaker 3: bit more tax efficient way. To count for the current year, though,
• 19:43
  Speaker 3: you need to make sure that your QCD is completed
• 19:46
  Speaker 3: by December thirty first. And one other really important part
• 19:50
  Speaker 3: in terms of timing I said earlier, you have to
• 19:53
  Speaker 3: be seventy and a half. That is a very hard
• 19:55
  Speaker 3: and fast date. So it's not the year you reach
• 19:58
  Speaker 3: age seventy and a half. It is the day you
• 20:01
  Speaker 3: reach age seventy and a half. So if you turn
• 20:03
  Speaker 3: seventy and a half in June and you do a
• 20:06
  Speaker 3: QCD in April, it does not count. It will be
• 20:10
  Speaker 3: it'll be a taxable distribution, So make sure you are
• 20:14
  Speaker 3: paying really close attention to that date. The donation has
• 20:18
  Speaker 3: to go directly to a qualified five oh one C
• 20:21
  Speaker 3: three charity or a house of worship or you know,
• 20:24
  Speaker 3: making sure that these are actually charitable organizations. They cannot
• 20:30
  Speaker 3: be sent to donor advised funds or private foundations. So
• 20:34
  Speaker 3: we've talked about especially donor advised funds on the on
• 20:37
  Speaker 3: the show before. Those are not even though they are
• 20:41
  Speaker 3: considered charities, they are not able to receive qcds from
• 20:45
  Speaker 3: an IRA. And as we've mentioned before, we'll say it
• 20:48
  Speaker 3: a million times over, your kids do not count as
• 20:51
  Speaker 3: a charity, so we cannot do qcds directly to your children.
• 20:56
  Speaker 3: And just keep in mind here, when you do a QCD,
• 20:59
  Speaker 3: your not getting an additional charitable deduction that you're actually
• 21:05
  Speaker 3: you know, reporting on for your itemized deductions, but instead
• 21:10
  Speaker 3: it's actually excluded from your income altogether. Okay, So it's
• 21:14
  Speaker 3: just rather than deducting it off your income for the year,
• 21:16
  Speaker 3: you're just not adding it to your income for the year.
• 21:22
  Speaker 3: And lastly here this is really really important. When you
• 21:26
  Speaker 3: get your ten ninety nine R form in late January
• 21:29
  Speaker 3: early February from your IRA custodian, where it shows you
• 21:32
  Speaker 3: know how much you took out for the year, how
• 21:34
  Speaker 3: much federal tax you withheld, how much state tax, it
• 21:38
  Speaker 3: is not going to break out your qcds from your
• 21:41
  Speaker 3: total distributions, okay, So it's not going to say, well,
• 21:44
  Speaker 3: you took out twenty thousand, but five thousand were qcds,
• 21:47
  Speaker 3: so you know there's no tax due on that. You
• 21:50
  Speaker 3: have to actually keep documentation of how much went to
• 21:53
  Speaker 3: a charitable organization and actually share that with your tax
• 21:56
  Speaker 3: prepare so they can make sure that they exclude that
• 21:59
  Speaker 3: that QCD amount from your income for the year, so
• 22:02
  Speaker 3: you do not end up paying taxes that you don't
• 22:05
  Speaker 3: actually own.
• 22:06
  Speaker 1: Really important information there from Eric Schwartz, of course, joined
• 22:09
  Speaker 1: this morning by Eric Schwartz and CJ. Closs. They are
• 22:11
  Speaker 1: our retirement planning professionals from Class Financial online Class Financial
• 22:15
  Speaker 1: dot com. That's Coss k l a A S Financial
• 22:18
  Speaker 1: dot com and they're telephone number six oh eight four
• 22:20
  Speaker 1: four two five six three seven. We'll get to the
• 22:22
  Speaker 1: class quiz question the week. We'll talk about some of
• 22:24
  Speaker 1: the more subtle things to know about when it comes
• 22:27
  Speaker 1: to rm ds. We'll get to that next as Money
• 22:29
  Speaker 1: in Motion with Class Financial continues right here on thirteen
• 22:32
  Speaker 1: ten Double u IBI talking with our retirement planning professionals CJ.
• 22:35
  Speaker 1: Closs and Eric Schwartz. They come to us from Closs Financial,
• 22:38
  Speaker 1: the website Class Financial dot Com telephone number six O
• 22:41
  Speaker 1: eight four four two five, six, three seven talking this
• 22:44
  Speaker 1: week about our mds, and I feel like we always
• 22:48
  Speaker 1: with a lot of this stuff kind of scratch the surface.
• 22:51
  Speaker 1: There's so much more to this.
• 22:52
  Speaker 2: I know.
• 22:52
  Speaker 1: There's also some important subtleties when it comes to rm
• 22:56
  Speaker 1: ds that folks should know about, aren't there? CJ.
• 22:59
  Speaker 2: Yeah, there are, Sean and Eric did a great job there,
• 23:03
  Speaker 2: just kind of almost hinting at the complexity of all
• 23:06
  Speaker 2: that's involved here. I mean rm ds. Really, the only
• 23:10
  Speaker 2: way to not have to pay income tax on those rmds,
• 23:14
  Speaker 2: at least in a significant way or in an easy way,
• 23:16
  Speaker 2: is through those qualified charitable distributions that Eric was talking about.
• 23:20
  Speaker 2: But then you get into the weeds and you go, well,
• 23:23
  Speaker 2: how do I do a qualified charitable distribution? Do I
• 23:26
  Speaker 2: write a check? Do I have my financial advisor or
• 23:28
  Speaker 2: my custodian do it? And then and then I'm assuming
• 23:31
  Speaker 2: they put it on a different ten ninety nine, right,
• 23:33
  Speaker 2: and then they just and it's like no, no, It's
• 23:36
  Speaker 2: just it's so complex. So listen, there's a reason why
• 23:41
  Speaker 2: people like Eric and myself have jobs because we do
• 23:45
  Speaker 2: this all day every day. We can do it in
• 23:47
  Speaker 2: our sleep. But I will admit to you hearing Eric
• 23:51
  Speaker 2: talk that through, it just makes my mind, you know,
• 23:55
  Speaker 2: kind of go all over the place thinking how difficult
• 23:58
  Speaker 2: this is for the average consumer. So I know this
• 24:01
  Speaker 2: sounds like I'm trying to drive you towards us everybody,
• 24:03
  Speaker 2: and that's really not my intent. My comment would just
• 24:06
  Speaker 2: be find somebody that you know and trust who stays
• 24:09
  Speaker 2: on top of these rules and rags and how this
• 24:11
  Speaker 2: all works, because the tax benefits can be substantial. I'll
• 24:17
  Speaker 2: give a hinting of this. Eric was just talking about qcds.
• 24:21
  Speaker 2: If you're over seventy and a half, you can do
• 24:23
  Speaker 2: qualify charitable distributions, which are direct to distributions from your
• 24:26
  Speaker 2: IRA to a qualified charity. Well, listen, if you didn't
• 24:31
  Speaker 2: do it that way, and you just paid the RMD
• 24:33
  Speaker 2: to yourself and then gave to those charities, you'd probably
• 24:36
  Speaker 2: have to be given over twenty grand a year, if
• 24:38
  Speaker 2: not thirty grand a year to get any tax benefit
• 24:40
  Speaker 2: from that due to the high standard deduction amounts. So
• 24:43
  Speaker 2: that little piece of advice right there where you just say, hey,
• 24:47
  Speaker 2: let's just change the way in which you give to
• 24:49
  Speaker 2: your charities could be the difference of saving twenty percent
• 24:53
  Speaker 2: on twenty or thirty thousand dollars of gifts you give
• 24:56
  Speaker 2: to your church. This is not like small stuff you
• 25:00
  Speaker 2: Actually there are huge tax benefits associated with just knowing
• 25:05
  Speaker 2: how the rules or what the rules are, and how
• 25:07
  Speaker 2: to function within them. Okay, now a couple of other things,
• 25:10
  Speaker 2: just to be aware of a common question that we
• 25:12
  Speaker 2: get is, well, what about if I have multiple irays? Well,
• 25:16
  Speaker 2: if you have multiple iras, the RMD amount can be
• 25:21
  Speaker 2: met from any one or combination of all of those iras.
• 25:26
  Speaker 2: So think I have three iras that on December thirty
• 25:28
  Speaker 2: first all had a million dollars combined. I could just
• 25:32
  Speaker 2: pull the required minimum distribution from one of those iras.
• 25:36
  Speaker 2: I don't have to pull equally from all of them.
• 25:38
  Speaker 2: An exception to this rule is if I have three
• 25:41
  Speaker 2: irays and then one old four to oh one K
• 25:44
  Speaker 2: plan that I'm no longer eligible to contribute to the iras,
• 25:47
  Speaker 2: I can pull all of my distributions from one of them,
• 25:50
  Speaker 2: but I cannot aggregate my old four oh one K
• 25:53
  Speaker 2: as part of that that amount as well, the four
• 25:56
  Speaker 2: oh one K or four h three B that sits
• 25:58
  Speaker 2: at my old employer has its own own RMD that
• 26:01
  Speaker 2: must be met by a distribution from that account. So listen, everybody,
• 26:06
  Speaker 2: you know. Long story short, just I can't suggest enough
• 26:09
  Speaker 2: when it gets into these retirement distribution patterns and taxes
• 26:14
  Speaker 2: and charitable distributions, this is really where firms like us
• 26:18
  Speaker 2: and others can shine and help you dramatically. So you
• 26:21
  Speaker 2: might want to consider reaching out to a firm eventually
• 26:23
  Speaker 2: to help you through some of these complexities.
• 26:25
  Speaker 1: A really great tool and a really great opportunity. Just
• 26:28
  Speaker 1: got to make sure everything's executed properly, and as we
• 26:30
  Speaker 1: talk each week with our retirement planning professionals professionals from
• 26:34
  Speaker 1: Class Financial, don't forget. If you ever miss part of
• 26:36
  Speaker 1: the show or you want to share the podcast, you
• 26:38
  Speaker 1: can always head it over to classfinancial dot com. That's
• 26:41
  Speaker 1: coss Klaas financial dot com. You can also get to
• 26:44
  Speaker 1: know CJ Eric and the whole team at COSS Financial
• 26:47
  Speaker 1: as well as I mentioned, listen to the podcast and
• 26:49
  Speaker 1: subscribe as well. Beret Telfue number six oh eight four
• 26:52
  Speaker 1: four two five six three seven. No charge for that
• 26:54
  Speaker 1: initial get to know your appointment at Loss Financial. It
• 26:57
  Speaker 1: will be complementary to you. Again, they're number six so
• 26:59
  Speaker 1: eight four four two five six three seven. Gonna hold
• 27:02
  Speaker 1: on to that telephon number, because it's time now for
• 27:04
  Speaker 1: the closs quiz question in the week. It works like this,
• 27:06
  Speaker 1: In just a moment, I'll ask you the closs quiz
• 27:08
  Speaker 1: question the week. You will then have thirty minutes from
• 27:09
  Speaker 1: the end today's program to call the Class Financial Office
• 27:12
  Speaker 1: right here in Madison at six oh eight four four
• 27:14
  Speaker 1: two five six three seven. If you are the first
• 27:17
  Speaker 1: caller with the correct dancer, you'll win this week's prize,
• 27:20
  Speaker 1: which is a twenty five dollars gift card to Jersey Mikes.
• 27:23
  Speaker 1: This week's closs quiz question week is this. What does
• 27:26
  Speaker 1: the letter R stand for in the acronym R M
• 27:30
  Speaker 1: D Telephone number six oh eight four four two five
• 27:33
  Speaker 1: six three seven. First got correct anser win this week's
• 27:36
  Speaker 1: prize at twenty five dollars gift card to Jersey Mike's.
• 27:38
  Speaker 1: And don't forget that's Class Financials Office here in Madison
• 27:41
  Speaker 1: as well, telephone number six oh eight four four two
• 27:43
  Speaker 1: five six three seven C J.
• 27:45
  Speaker 2: Eric.
• 27:46
  Speaker 1: It's always informative, it's always great chatting with you. I'll
• 27:48
  Speaker 1: be at a great Thanksgiving and we'll do it all
• 27:50
  Speaker 1: again real soon. Thanks Sean, see you guys, doctor Marty Greer.
• 27:53
  Speaker 1: She is back from Pennsylvania. We'll check in with her
• 27:56
  Speaker 1: next year on thirteen ten Wi