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Demystifying RMDs: Timing, Amounts, and Tax Strategies · Money In Motion with Klaas Financial

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And our phone lines are open to you right now if you've got questions for
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our retirement planning professionals from Class Financial. The number to get on the air
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this morning six oh eight three two one thirteen ten. That's three two one
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thirteen ten. We'll get you on the air with CJ. Closs and Malia
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Quavis. They are our retirement planning professionals from Class Financial. Their website Cossfinancial
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dot com that's spelled k l aa S Financial dot com. Great website site
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com. Dell phone number for the office right here in Madison six oh eight
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four four two five six three seven. There is no charge for the initial
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get to know you appointment at COSS Financial. That conversation it will be complementary
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to you again their number six oh eight four four two five, six three
1:02
seven. The number to get on the air six oh eight three two one
1:03
thirteen ten. That's six oh eight three two one thirteen ten. Without any
1:07
further ado, we are joined this morning by c J Class and Malia Quavis.
1:11
CJ, how are you doing this week? I'm doing great. Happy
1:15
to be here, Sean, It's great to have you along. Malia,
1:17
how have you been? Very very good? Good to be here as well.
1:21
It's it's always great to talk with both of you, and we have
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a This is one of those conversations this week that I feel like I could
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say this probably every week. Not only is it amazingly interesting, there is
1:32
a lot to know about just three little letters, RMD's required minimum distributions.
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There is so much to learn about and it's an absolutely fascinating thing, and
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we're going to talk about a little bit about those this week with CJ and
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Malie. Again. It should be an absolutely fantastic show. If you miss
1:49
any of the show, don't forge you can always listen back at classfinancial dot
1:53
com. Subscribe to the podcast right there class financial dot com. Before we
1:56
start talking about RMD's another cool feature of the program is the Class Quiz question
2:00
of the week, chance for you to win a twenty five dollars gift card
2:04
for something great this week, no exception, our friends from Class Financial will
2:07
provide a twenty five dollars gift card to Sephora. Tell you a little bit
2:10
later how you can win that later on in the program, Little tiptough if
2:13
you listen closely most of the time, just about every time both the question
2:16
and answer come up during each week's program. And before we get rolling on
2:21
this week's conversation, let's actually take a look back at last week's show and
2:24
talk a little bit about the Class Quiz question week at the question and answer
2:28
there from last week's show. Malia, Yes, So last week we had
2:30
a great conversation about what accounts you might have out there that you can actually
2:37
see that are guaranteed. So we're talking about FDIC insurance. We covered NCUA
2:42
insurance through the credit unions, so just understanding what could be insured and what
2:47
is not insured. And our question last week was what is the maximum amount
2:54
the FDIC insurance will cover for a single depositor account. Was it one hundred
3:00
and fifty thousand or up to two hundred and fifty thousand per single depositor account,
3:07
and Mike of Fitchburg was quick to the phones. He correctly answered that
3:10
question. Answer is two hundred and fifty thousand dollars. So listen carefully today
3:15
for our question. You two can be like Mike. Remember that song so
3:20
we use commercial Michael Jordan's took that's stuck and everybody said this morning, and
3:24
I apologize. You can be like Mike just by paying close attention to the
3:29
program and being a fast dialer. A little bit later on the show,
3:31
speaking of being a fast dialer, you can take your time. We'd love
3:34
to hear from you. Tho this morning gets you on the air. Six
3:36
eight three two one thirteen ten. That's six h eight three two one thirteen
3:39
ten. Love to have you join us this morning with Money in Motion with
3:43
Class Financial. Were we talking, of course, when you think about retirement
3:46
planning and of course working with clients to help them when it comes to distribution
3:50
of income from their investments. What do folks need to know when it comes
3:53
to things like starting our md CJ bring this up from time to time,
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as people reach certain ages, this could come into play for them, and
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so just you know, revisiting this topic can be can be helpful, so,
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as always, a quick education about rmds, which stands for required minimum
4:14
distributions. First, let's kind of set the stage with these basics so you
4:18
understand what this is all about. So, along with the passing of the
4:21
Secure Act back in twenty twenty and the subsequent passing of Secure Act two point
4:28
zero, there were some changes with regards to the required minimum distribution schedules.
4:31
Remember that rmds are designed to ensure that investments in your iras do not grow
4:38
tax deferred forever. So pause on that. Remember when you put money into
4:43
a retirement account IRA four three B four oh one K four fifty seven.
4:47
The most common way, or the quote unquote traditional way that we would contribute
4:51
to these was on a pre tax basis. So we would put money in
4:55
and get to reduce our taxable income for the year, which would reduce our
4:59
tax line liability, and then that would grow on a tax deferred or compounded
5:03
basis until we get to retirement. So when we get to retirement, of
5:06
course, when we pull money out, there is an income tax due at
5:10
that time. This makes very basic logic sense. Well, the question becomes
5:15
what if you don't need that money now? Now some of you are rolling
5:18
your eyes, like, oh, this is all the wealthy people. That
5:20
might be true, but you might just find that you don't need it until
5:24
later, or you don't need as much as you thought. That could be
5:27
because of an inheritance from a family member. We actually run into it quite
5:30
often. You don't need as much as you thought. And so therefore the
5:32
question becomes, can I just defer that forever? And the answer is required
5:39
minimum distributions. No, the IRS wants to begin receiving the associated taxes that
5:44
have been deferred on these accounts at some point. So here's some things to
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know. Owners of iras must withdraw part of their tax deferred savings each year
5:55
after reaching the age of seventy three. This for people born between January first
6:00
of nineteen fifty one to December thirty first of nineteen fifty nine. Again,
6:05
I said, in current law, it is at age seventy three. Now
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some of you are listening, going, no, it's not. I started
6:13
at seventy and a half. It's true for you it used to be that,
6:15
but you're beyond seventy three already, right, So if if you were
6:19
born between January first of nineteen fifty one and December thirty first to nineteen fifty
6:24
nine. Your RMD age is now seventy three, but specifically, your first
6:30
required minimum distribution must now be taken by April first following the year you turn
6:35
age seventy three. This is known as your RBD, your required beginning date.
6:43
So again, if I turn seventy three this year, technically I can
6:47
wait to draw that first rm D until April first of twenty twenty five next
6:53
year. But here's the tricky part. If you do that, if you
6:57
take this first year like FIR, then subsequent rmds must be completed by December
7:03
thirty first of every year thereafter. Let me repeat that, after your required
7:10
beginning date, subsequent rmds must be completed by December thirty first each year thereafter.
7:15
What that means is that if you if you take that optionality to push
7:17
off your first year's RMD to April first of the following year, that means
7:23
you'll have two that year if everybody's tracking that. So said another way,
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typically we don't suggest people actually push it out to the following year after they
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turn seventy three unless there's some tax reason to do. So okay, moving
7:35
on from that nerdy topic. So for people born after January first of nineteen
7:43
sixty, your required minimum distribution age is now seventy five. Let me repeat
7:48
that. This is big for people born after January first of nineteen sixty and
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I'm raising my hand. I was born after that. Your required minimum distribution
7:58
age is now aged seven five. Well, this is a big deal,
8:01
everybody. I mean, it used to be seventy and a half. For
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a long time it was seventy and a half, and now it's seventy five.
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All this means is that you can defer the income tax consequences and continue
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to get compound growth for a longer period of time, which is which is
8:13
good. It's a net win for savers. Now, remember if you withdraw
8:18
less than your RMD, you may owe a penalty. We'll get into this
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a little bit later, but this this has varied over the years, and
8:26
the penalty as actually has actually come down over time. Talking this morning with
8:30
CJ. Closs and Malia Quavis, they are our retirement planning professionals from Class
8:33
Financial. Our phone lines here at station. They are open love to have
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you join us if you've got a question for Malia and CJ. I got
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to just pick up phone dial in now six eight three two one thirteen ten.
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That's six h eight three two one thirteen ten. Love to have you
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join us this morning. Don't forget. You can get to know Clause Financial
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anytime online Colssfinancial dot com. That's Coss k l aas Financial dot com.
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Now only can you get to know the team. You can learn about the
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separate divisions at COSS Financial. Also sign up for the market Pulse newsletter at
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coss financial dot com. They're tough number six O eight four four two five
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six three seven. No charge for that initial gates new the appointment tech costs
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financial. It will be complementary to you. Again, they're number six soh
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eight four four two fifty six thirty seven. What else do we need to
9:11
know, CJ. When it comes to required minimum distributions, well, pay
9:16
attention to the terminology there. And by the way, I've had to teach
9:20
myself this as I've done more and more studying in our industry and across other
9:24
industries. Is like pay attention to the terms that are being used now in
9:28
the medical field. Often these are terms that none of us know how to
9:31
how to digest right there. They're like Latin rooted terms and so we don't
9:35
know what they mean. But in the case of this required minimum distribution,
9:41
so if somebody were to say to me or to you, well, can
9:46
I take more than that? The answer is read the term required minimum distribution.
9:54
So this is the minimum amount you must switchdraw from your account. You
9:58
can always withdraw more, and remembers it's a required minimum distribution at a starting
10:03
age. That doesn't mean you can't draw before then. It just means if
10:09
you haven't been drawing by then, then a requiredum minimum distribution will apply.
10:13
So just remember it is a minimum, not a maximum, and it doesn't
10:16
mean you can't draw before that. It just means if you haven't been by
10:20
that time, you have to meet the minimum. And furthermore, sometimes people
10:24
will say, well, what if I am drawing at say seventy two,
10:26
but then I turn seventy three and I'm not drawing enough. I go,
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well, again, read the definition required minimum distribution. You must meet that
10:35
minimum distribution. Your withdrawals will be included in your taxable income. By the
10:39
way, so just remember that this is part of the reason. Well,
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this is the reason why this is part of legislation is because Congress, the
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IRS, the federal government wants to start getting their tax revenue off of this.
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So when you pull out that minimum it generally I'm saying generally, it
10:56
generally will be added to your taxable income, except for any part that was
11:01
part of your basis or any part that can be pulled out tax free,
11:07
such as qualified distributions from a wroth account or anything that goes to charities via
11:13
a qualified charitable distribution. But more to come on that in just a little
11:16
bit. So when you think of the calculation, because some of you are
11:20
going, well, what is that? What is that minimum amount when I
11:22
turned seventy three? So the calculation of it for any year is the account
11:28
balance as of the end of the immediate preceding calendar year. So just think
11:33
December thirty, first of say, last year, divided by a distribution period
11:39
from the IRS's uniform lifetime table, and the table gives you a life expectancy
11:46
factor. A separate table is used if the sole beneficiary is your spouse is
11:52
the owner's spouse who is ten or more years younger than you. But this
11:56
table can be found at Investor dot gov or at IRS dot gov. Just
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go to either one of those websites, kind of look for the search feature
12:03
and type in RMD table or RMD worksheet anything like that. So these are
12:07
widely available tables that you can go to. But just remember December thirty,
12:13
first of the prior year, divided by the number, which is a life
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expectancy factor. We'll give you a dollar amount, and that first year's RMD
12:22
dollar amount is somewhere around three point seven percent. By the way, so
12:26
for every one hundred thousand dollars, it's about thirty seven hundred dollars of minimum
12:31
distribution as promised, This is interesting time. There's a lot to this.
12:35
It's a really really good program. As always, if you missed any part
12:39
of today's show and you maybe want some more of those details, you can
12:41
always listen back at colssfinancial dot com. That's Klaas Financial dot com. Great
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website and resource only listen back to the podcast. Also sign up for the
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weekly Market Pulse newsletter gets you to the team gets No Cost Financial in their
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separate division. Speaking of Cost Financial, their telephone number really needs you to
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make that connection. All I gotta just pick uphone give a call six eight
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four four two five six three seven. That call, that first apployment not
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gonna cost you a thing at COSS Financial, it will be complementary to you
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again their number six oh eight four four two five six three seven. And
13:11
of course telephon number to get on the air that is six oh eight three
13:15
two one thirteen ten. That's six oh eight three two one thirteen ten.
13:18
Love to get you on with CJ Maalia of Class Financial. We'll talk about
13:22
different account not all accounts, but some there are ones that you need to
13:24
be aware of when it comes to distribution for rmds. With the details from
13:28
Malia and of course we will take your call next as Money in Motion with
13:31
Coss Financial continues here on thirteen ten wiv E and our phone lines are open
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for you right now if you have questions for Malia Quavis and CJ. Closs,
13:43
of course they come to us from Class Financial. A telephone number to
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get on the air six oh eight three two one thirteen ten. That's six
13:50
oh eight three two one thirteen ten. The website for Class Financial Coss Financial
13:54
dot com that's k l aa S Financial dot com. And their telephone numbers
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six eight four four two five six three seven. No charge for that initial
14:03
get to know you appointment deck class financial. It will be complementary to you.
14:07
Again they're number six soh eight four four two five six three seven and
14:11
to get on the air six oh eight three two one thirteen ten. That's
14:13
three two one thirteen ten. Talking this week about rmds required minimum distributions and
14:18
Malia from what accounts When it comes to those rm ds, would they need
14:22
to be distributed from? Yeah, that's a great question. And just just
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for simplicity here, we want to make sure that when people we do throw
14:31
around acronyms all day long here and so this morning we're talking about rmds required
14:37
minimum distributions. Sometimes we hear of MrDs. That's minimum required distributions is all
14:43
the same, So I just want to make sure everybody's on the same page.
14:48
But when we're talking about these minimum distribution rules, Uh, the rmds
14:52
need to come out of the following accounts. Traditional iras, your step iras,
15:00
any simple iras, also any four to oh one K plans from prior
15:05
employers, four h three B plans from prior employers, and four fifty seven
15:11
plans from prior employers also profit sharing plans and other defined contribution plans. Now
15:18
you'll notice, I said from prior employers. So there's this exception. If
15:22
you're still working after the age of seventy three, and you're in and you
15:28
actually have a four to one K plan at that current employer, you are
15:33
not required to pull rmds from that current four to one K or four three
15:37
B. So case in point. In the last two weeks, I've had
15:41
two people who are so excited that they still work, and one of them
15:46
was seventy six years old. She's been working at the same company as an
15:48
office manager for forty plus years, still contributing into her four oh one K,
15:56
and has not taken a single RMD from it because she doesn't have to.
16:00
And yesterday I met with an eighty two year old who's been teaching for
16:03
fifty years. She also is working and has not touched her required minimum distributions
16:11
because she doesn't have to. So, as we said, it's got to
16:15
be from a current employer's plan. Now, anything left behind an old employer's
16:19
plan, those are game to come out as required minimum distributions. Now ROTH
16:26
accounts are different, and we've had some changes this year, but to be
16:29
specific, roth iras those do not require withdrawals until after the death of the
16:36
owner. Now, when those do come out as required minimum distributions, they
16:41
are not taxable as they come out, but they are required after the death.
16:45
But the difference that showed up this year was WROTH four to one case.
16:49
Previously, we would tell our listeners that you would need to eventually move
16:55
the WROTH four oh one k into a roth ira so you didn't have to
16:59
do required minimum distributions. What changed this year is the IRS said rmds are
17:04
no longer required to come out of WROTH four o one case. So that's
17:08
a big change because we're having a lot of people move them over so they
17:12
could avoid being forced to take the money out again. It always came out
17:17
not taxable, but obviously people don't like to be forced into situations they don't
17:22
like. It was very confusing, I know, it is, it is.
17:26
It is. Thank goodness we have you guys, our retirement planning professionals
17:30
from Class Financial to help us understand this stuff. Great opportunity if you've got
17:33
a question, love to get you on the air with CJ and Malia all
17:37
I gotta do is give us call six oh eight three two one thirteen ten.
17:40
That's three two one thirteen ten. Learn more about Class Financial the website
17:42
colssfinancial dot com and their telephone number six o eight four four two five six
17:47
three seven. No charge for that initial get to know appointment at Class Financial.
17:51
It will be complimentary to you again their number six oh eight four four
17:53
two five six three seven. So, Malia, how is the amount of
17:57
that RMD that required minimum distribution? How is that calculated annually? And does
18:02
that amount change every year? And what if we forget to take it out?
18:07
Yeah, you would never do that would not mean yes. So there
18:11
are two changing parts of the equation every year. First, I think your
18:15
age changes. Secondly, your account balance is on your retirement accounts change as
18:21
well. So they could be up, they could be down. They certainly
18:22
could be down because you did take a distribution out for that year. So
18:26
the equation is you take your December thirty first, prior year retirement balance,
18:32
so you don't know it for next year yet it was from December thirty first
18:36
of twenty twenty three, and you divide that number by a life expectancy factor.
18:41
And again you can use the uniform lifetime expectancy table. As CJ mentioned,
18:45
if you go to IRS dot gov you'll find an automatic RMD calculator.
18:51
But for simplicity, current table shows that if you're turning seventy three and twenty
18:56
twenty four, you can take that account balance and you can divide it by
19:00
your life expectancy withdrawal factor, which is currently twenty six point five. So
19:06
in essence, one hundred thousand dollars means you'd have to distribute from your pre
19:11
tax accounts approximately thirty seven hundred dollars thirty seven seventy three and twenty twenty four.
19:15
No, you would pay income taxes on that amount. So many times
19:19
people say, okay, so if I distribute that, that means I'm going
19:23
to get the whole thirty seven seventy three, and you can, but there
19:27
will be tax due. That's the whole point of required minimum distribution. So
19:32
like for our clients and many other advisors, we typically will withhold the necessary
19:37
tax forward that to the IRS so that the following year you're not facing a
19:44
tax bill preferably. So that's how that works. But some important RMD things
19:49
to know. If there's a younger spouse involved and the soul and if they're
19:55
the sole beneficiary of your IRA for the entire year and they are ten years
20:00
younger than you, they can actually you can actually use the joint life expectancy
20:04
table, so that actually allows for you to take a little bit less out
20:08
because obviously the spouse perhaps will live longer because they're younger. So that's really
20:14
important to know because you want to be able to stretch that money out as
20:18
much as possible. Another thing to know, rmds are calculated separately for each
20:23
IRA, but they can be aggregated when you start taking the money out,
20:27
meaning that you could have literally ten iras and a separate calculation for each,
20:33
But the IRS doesn't care where you take your RMD from as long as you
20:38
take the correct amount from. So many times people will just take it from
20:41
a single IRA for the amount versus pro rata. And also keep in mind
20:48
if you delay that first RMD as CJ mentioned and double up that first year,
20:55
you have to look at your taxable income because that could be significant.
20:57
So look carefully at your taxble income and the tax brackets are associated and plan
21:02
accordingly. And then finally, we like, we don't like the word penalty,
21:07
but this has really come down significantly now. So if you fail to
21:11
take your R and D by the deadline, which is December thirty first every
21:15
year, there is a twenty five percent penalty on the amount of the shortfall,
21:18
just the shortfall, and the penalty can be further reduced if the taxpayer
21:23
takes the missdistributions in a specific time frame. If the error is corrected within
21:29
two years, your penalty drops to ten percent. Some cases, if you
21:33
missed it due to a mistake and you can demonstrate that reasonable steps were taken
21:37
to resolve the issue, the IRS may waive the penalty. I said,
21:41
may this is the IRS we're dealing with, but please don't miss it.
21:45
If possible, work work with your financial advisor accountant to make sure you get
21:49
those out in a timely fashion. Maybe the penalty may be a little better,
21:52
but it's still one of those ouch ones that yeah, but we don't
21:56
like give them money back, No, not at all. As we talk
21:57
this morning with CJ. Class Malia Quavis, they are our retirement planning professionals
22:03
from Class Financial. You can learn more online the website colss financial dot com.
22:07
That's k L A A. S Financial dot Com and their telephone number
22:11
six oh eight four four two five six three seven. No charge for that
22:14
initial get to know you appointment at Class Financial. It will be complementary to
22:18
you again their number six oh eight four four two five six three seven.
22:22
What if you have an inherited IRA, what do you need to know when
22:25
it comes to r m DS. We'll got the details next as Money in
22:27
Motion with Class Financial continues here on thirteen ten. Wi B A talking with
22:34
our retirement planning professionals from Class Financial, Malia Quavis and CJ. Coss.
22:40
The website colss financial dot com. That's k l a A S Financial dot
22:44
com. There telephon number four four two five six three seven, No charge
22:47
for the initial gets know your appointment at COSS Financial. It is complementary to
22:51
you again that telephone number six oh eight four four two five six three seven.
22:56
Talking this week about r m ds and there's probably some folks listening going
22:59
on, I've inherited one, what do I need to know then? And
23:03
an IRA? What do I need to know then about r MDS? CJ.
23:07
Yeah. So again it's fascinating because these simple concepts which begins with well,
23:14
hey, the irs, and the federal government needs to run operations,
23:18
and so they need to eventually have have taxes paid on these taxa four dollars.
23:23
That's a simple concept, right, But when you start applying it,
23:29
boy, oh boy, does it get complicated. So we already went through
23:32
a fair number of complications, which is these ages for rmds are changing,
23:36
and the percentage and there's a table and how do you calculate it and a
23:40
required beginning date and all these fun things. Well, here's kind of complexity
23:44
layer number two, which is, what if I inherit a retirement account,
23:48
how do require distributions begin Then? Well, let's jump into that. So
23:52
inherited iras have had some changes as well with the passing of Secure Act one
23:57
and Secure Act two. So inherited iras are also subject to rmds. Typically,
24:06
if you inherited the account prior to twenty twenty, you're required to take
24:11
distributions based on your life expectancy if you are a non spouse. Let me
24:18
repeat that, if you inherited the account prior to twenty twenty, you're required
24:22
to take distributions based on your own life expectancy. Assuming you're a non spouse,
24:27
However, if you inherited an account in twenty twenty or later and the
24:33
original owner had already reached their required beginning date, which remember what is that
24:38
date, Well, it's when their rmds would have started based on their age
24:44
April first of the year following that as their require beginning date. So if
24:47
they had already reached their required beginning date and you inherited this account after the
24:51
year twenty twenty, you will need to continue taking minimum distributions. And if
24:57
you are a non spouse, you have have to have all that money out
25:00
within ten years. Okay, so again think of it. I'm going to
25:04
focus on the big picture because I'll be Frank on the air here trying to
25:07
give you all the calculations if this is quite complex. So big picture,
25:11
If you inherited a retirement account prior to twenty twenty, and you are a
25:15
non spouse, you generally have to take minimum distributions over your life expectancy,
25:18
which could be forty fifty sixty years. It depends on when you inherit the
25:22
account. If you inherit the account twenty twenty or later and you are not
25:29
the spouse, generally speaking, you will have to continue that minimum distribution if
25:33
the original owner had had minimum distributions themselves and all the money happy out within
25:40
ten years. And as you can imagine, woll whoa, whoa, whoa.
25:42
What if this is a million dollar IRA or a five hundred thousand dollars
25:47
IRA, does that mean I have to be taking potentially hundreds of thousands of
25:51
dollars out potentially, yeah, potentially, And of course that gets added to
25:55
your taxable income as a beneficiary. So what I'd say to you all,
25:59
if you're listening to this, you're probably gonna want to talk to a financial
26:03
planner if you're inheriting large pre tax retirement accounts, because the when and the
26:07
how much that comes out of that account is pretty important. Now, I
26:11
keep saying non spouse, So if you were the spouse, then you have
26:15
some choices that everybody else does not. First, you could transfer the account
26:21
into your own IRA, and then it's as though the money was always yours,
26:26
and you could begin taking required minimum distributions in the year you turn seventy
26:30
three, as an example, Or you can transfer your late spouses your decease
26:36
spouse's IRA into what's called an inherited IRA. And if the owner's spouse chooses
26:41
to take the IRA as a beneficiary rather than assuming it as their own.
26:45
They can choose when to begin taking r and ds on the on the basis
26:48
of their own life expectancy. So let me again simplify this. If you
26:52
are a spouse and you are receiving a retirement account four one K four oh,
26:56
there would be IRA from a deceased spouse, and you are under the
27:00
age of fifty nine and a half, you are generally going to want to
27:04
take that as an inherited IRA. You're not going to want to take it
27:07
over as your own. You're going to want to put it into an inherited
27:11
IRA. Reason being is because you want to have access to that without a
27:15
penalty. If you move it into your own IRA and your pre fifty nine
27:18
and a half, generally speaking, you won't be able to pull money out
27:21
until you reach that age fifty nine and a half. So goodness gracious,
27:26
Even as I'm explaining this, I feel like it's so com complex. I
27:30
hope what everybody's hearing is there's a lot of rules around this. If you
27:34
are either fortunate or unfortunate enough to receive one of these types of accounts in
27:41
twenty twenty or later. Make sure you know the rules and that you abide
27:44
by them. Really important guidance there. As we talk with CJ. Claus
27:48
and Aliakuavis, there's an amazing topic when it comes to required minimum distributions are
27:53
mds. Of course, if you've got questions, you can always learn more
27:57
online classfinancial dot com. If number for Class financial six SOH eight four four
28:02
two five six three seven, no charge that initially gets to know you appointment
28:04
at Class financially, it will be complimentary to you again their number six SOH
28:08
eight four four two five six three seven. So we've uh, we've talked
28:12
about r mds. We've talked about talked about a lot of the ins and
28:18
outs of that. And then there's another abbreviation I hear from time to time
28:21
qcds. And let's talk about rmds and charitable giving and what do we feel
28:26
like we're going down a whole other one here, CJ. We are yes.
28:32
If your heads aren't spinning enough, you know, strap in. But
28:36
let me let me encourage everybody, because I want to filter or couch what
28:40
this topic is about. So QCD has qualified charitable distributions if you are charitably
28:45
inclined and you are getting near your required minimum distribution age or more simply near
28:56
seventy and a half. If that is you and you have a retirement account,
29:00
pay special attention here because this is a huge win for charities, a
29:04
huge win for you. So here's the concept. Qualified charitable distributions can begin
29:12
at age seventy and a half. And I know you're going wait wait,
29:15
wait, I thought rmds are out further. They are required minimum distributions are
29:19
being pushed out the age at which you must begin. Those required minimum distributions
29:23
are being pushed out to seventy three and seventy five. However, that did
29:29
not get matched with the age at which you can do a qualified charitable distribution.
29:33
Fyi, qualified charitable distributions can only come out of iraras that cannot come
29:38
out of four to one case. And secondarily, you must literally be seventy
29:44
and a half, so it can't be the year in which you turn seventy
29:45
and a half. You must be seventy and a half or older in order
29:49
to qualify at the time you do a qualified charitable distribution. To put it
29:53
simply, you all know that if you pull money out of your pretax retirement
29:57
account and put it in your post or your checking account. That shows up
30:03
on your ten ninety nine as a taxable distribution and it increases your taxable income
30:07
and boom, you get hit with marginal income taxes. However, if instead
30:11
of that, I take that money out and direct it to a charity,
30:15
that money, it does show up on my ten ninety nine. By the
30:18
way, it shows that I pulled the money out, so it does kind
30:22
of count towards my minimum distribution, but it does not show up as taxable
30:26
income to me. Now, some people go, why does this matter,
30:32
I'll just give to the charity out of my checking account. Because remember everybody,
30:37
when you give to a charity out of your checking account, it shows
30:40
up in your schedule A, and your schedule A is known as your itemized
30:44
deductions, and those itemized deductions between your charitable giving, your mortgage interest,
30:48
your salt deductions, and your medical deductions. Of all those itemized deductions,
30:53
they must exceed be greater than your standard deduction, which your standard is HI.
31:00
These days, for many people over sixty five, this number is getting
31:03
up to thirty thousand dollars. So if you're itemized don't exceed thirty grand.
31:07
Well, it says though you never gave to a charity in the first place.
31:11
So here's the key. If you are over seventy and a half,
31:15
if you are giving to charities, and if you have a pretax retirement account,
31:21
you should absolutely be giving out of your IRA and not out of your
31:27
checking account. Let me repeat that. Gosh, I just I hope if
31:30
there's anything people here. If you are given to charities, if you are
31:36
over seventy and a half, and if you have a pre tax retirement account,
31:40
you should absolutely be giving out of that out of that IRA to the
31:45
charity instead of your checking account. Now you know what, even as I
31:48
say that I've got to give my disclaimer, I think I really don't even
31:53
know a circumstance under which you wouldn't. But I don't like using absolute terms,
31:57
and I just did there, So I think under no. Niney nine
32:00
point nine percent of the circumstances you should. So long story short, talk
32:02
to your accountant, talk to your financial advisor, and really slow down and
32:07
make sure that you are trying to take advantage of that qualified charitable distribution feature.
32:12
A really great win for everybody. But you got to make sure you
32:15
follow follow the guidance and the rules and the guidelines. And as we talk
32:19
with CJ and Maleia, one of the great things is is that conversation.
32:22
I got to just give them a call at Colss Financial six oh eight four
32:24
four two five six three seven, no charge. Then you could know your
32:27
conversation at COSS Financial. It will be complimentary to you. The website cossfinancial
32:31
dot com. That's coss k l Aasfinancial dot com. I mentioned the telephone
32:36
number six soh eight four four two five six three seven. Going to hold
32:38
on to that telephone, Oumber now because it's time for the Coss Quiz Question
32:42
of the week. It works like this, just a moment, I'll ask
32:44
you the Coss Quiz question a week. You will then have thirty minutes from
32:46
the today's program to call the Class Financial office right here in Madison at six
32:50
oh eight four four two five six three seven. If you are the first
32:53
call with correct answer, you win this week's prize, which is a twenty
32:57
five dollars gift card. Two four up. This week's Class Quiz question week,
33:00
is this true or false? Is it okay to withdraw more than the
33:06
required minimum amount from your iras each year. True or false telephone number six
33:12
oh eight four four two five six three seven first goal correct answer one that
33:15
twenty five dollars gift card two. Sephora dot forget as well. That's Class
33:17
Financial Office right here in Madison six oh eight four four two five six three
33:22
seven on the website Class financial dot com. That's Class k l a A
33:25
S Financial dot com. Cee Jmialia, it's always great chatting with both of
33:30
you, guys. Enjoy this fantastic day. Thanks. Sean News comes your
33:34
way next right here on thirteen ten WUIB eight