At age 70 1/2, your clients will start taking required minimum distributions from their 401(k)s and IRAs whether they need the money or not. A large majority of affluent savers don’t need that money to cover their expenses and are wondering what to do with it.
That’s according to the RMD Options study from Allianz Life Insurance Co. of North America, which finds that 88% of high-net-worth consumers ages 65 to 75 are familiar with RMD rules on tax-deferred retirement plans, and a full 80% of these respondents believe they will not need all of their RMDs for day-to-day living expenses.
As a result, they’re not sure what to do with the total amounts of these RMDs, and 32% are having a tough time understanding what they’ll do to their taxes in retirement.
This concern with taxes is a big deal, since 95% of respondents think it’s very important to reduce their taxes in retirement. In fact, 71% said they’re interested in using RMD payments to fund a financial product that could help offset the impact of taxes.
They also want a more efficient way to handle RMD payments, with 57% of respondents in the study saying they want the disbursement and tax payment to occur “without getting involved.”
Another dilemma is what to do with the leftover money after taxes, and some of their choices are age-dependent; half say they want to leave “a significant portion” of what they’ve set aside to beneficiaries, but 58% of older respondents — ages 71 to 75 — are even more likely to say they want to leave a legacy.