New Rules For IRA Required Minimum Distributions

A jar of coins with the word retirement written on it.


With the exception of the COVID-19 blip over the last two years, people are living longer and the IRS has changed the rules on Required Minimum Distributions (RMDs) on IRA’s, 401(k)’s and 403(b)’s.  RMDs were suspended for 2020 because of COVID, but they are back.  You don’t have to take RMDs from Roth IRAs, but you do from non-Roth’s.  The 2019 Secure Act raised to 72 the age at which RMD’s kick in, up from 70.5 years, but not for people who were already taking RMDs in 2019.  Starting in 2022, many people will have RMD’s that are about 6-7% smaller than they would have been under the IRS’s old life expectancy tables.  Speak to your tax accountant because the rules have become very complex (See AARP Bulletin, December 2021, page 30).

Pacific Grove, CA Tips On ROTH IRA Conversions


Tax rates are likely to go up under the Biden administration, and one hedge against this is to convert an existing IRA or 401(k) to a Roth IRA.  You will have to pay taxes on the amount converted but then the IRA grows tax free.  Talk to a tax advisor—and make sure you wait closer to year-end before doing it in case tax rates increase this year.  Or let Monterey Bank or one of our other local banks walk you through the rules.  There are few—for instance, there are no Required Minimum Distributions from this type of IRA.  Talk to Monterey Credit Union, Monterey County Bank or many of the other local financial institutions to open an account, or a financial advisor for advice.

Monterey, CA New IRA Retirement Tool With No Early Withdrawal Penalties

A jar of coins with the word retirement written on it.


With the COVID-19 pandemic forcing a number of Americans to be laid off, many people are taking a close look at 72(t) plans, which allows you to withdraw money without the usual 10% penalty, even if you are below the age of 59.5 years old.  Dubbed 72(t) plans, they give you a series of equal payments taken at least annually.  The duration of the plan must be at least five years or until the person reaches 59.5 years, whichever is longer.  Talk to your tax planner, Monterey County Bank or one of our other local banks about this option.  Another possibility which was made as part of the Cares Act is an exemption to coronavirus-related distributions as another exception.  If you are interested in this option, act quickly as it’s only available until year end.

https://www.wsj.com/articles/early-ira-withdrawals-can-be-penalty-free-11607004008

Monterey, CA Tips On ROTH IRA Conversions

A jar of coins with the word retirement written on it.


Tax rates are likely to go up under the Biden administration, and one hedge against this is to convert an existing IRA or 401(k) to a Roth IRA.  You will have to pay taxes on the amount converted but then the IRA grows tax free.  Talk to a tax advisor—and make sure you wait closer to year-end before doing it in case tax rates increase this year.  Or let Monterey Bank or one of our other local banks walk you through the rules.  There are few—for instance, there are no Required Minimum Distributions from this type of IRA.

Monterey, CA Avoid Taxes on Required Minimum IRA Distributions By Giving To Non-Profits


Although the IRS requires us to withdraw a certain amount each year from our retirement accounts in order to satisfy the Required Minimum Distribution requirements.  However, if you don’t need the money, you can transfer money directly to a non-profit via a qualified charitable distribution.  This can be done for a total of up to $100K per year and meet the IRS guideline.  You can split your contributions between as many charities as you want under IRS rules, although some banks do place a limit on this.  Talk to your bank and a local accounting firm like Hayashi & Wayland.

https://www.hw-cpa.com/

New Legislation Could Boost Retirement Savings

A jar of coins with the word retirement written on it.


A bill from Rep. Richard Neal (D, Mass.) and Rep. Kevin Brady (R. TX) would boost the age for required minimum distributions (RMDs) from IRAs and 401 (k) accounts to 75, from 72.  It applies to those born after June 30, 1949.  It would also waive RMDs entirely who have a cume total of less than $100K.