For clients with large balances in a traditional retirement account, like an IRA or 401(k), required minimum distributions are a major retirement expense.
RMDs are intended to ensure that tax-deferred retirement savings are actually used, and taxed, during the saver’s lifetime. They are calculated based on a client’s remaining life expectancy, with the percentage of the account that must be withdrawn each year increasing as the client ages.
When your clients reach their early 60s, they have likely accumulated substantial retirement assets in accounts subject to RMDs. The decade before your client turns 73 and must start distributions is a good time to reduce or relocating these assets. Clients who have retired may find themselves in a relatively low tax bracket in which taking taxable distributions makes sense. Those who are still working have options within their 401(k).
Here are some moves for clients to consider in that decade to help reduce their distributions and tax impact.
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