Baby boomers have witnessed many firsts throughout history and have paved the way for how we live and work. The “original” boomers, those born in 1946, have been at the forefront of managing change for years. These boomers will once again lead the way as many will be turning age 70 ½ this year. And for these clients who hold qualified accounts and Individual Retirement Arrangements (IRAs), 70 ½ is the magic number when they may need to start taking their required minimum distribution (RMD) by April 1, 2017. Taking this into account, there is great opportunity as a financial professional to reach out to boomer clients who are either entering this age or who will be in the near future to help guide them on this next financial stage of their lives.

The following tips can help start the conversation by offering ways to manage retirement income as this first wave of boomers begin to mingle their RMD with Social Security and other income. These tips also bring to mind tax issues that clients may face as they begin this next phase.

1. Decide how to use the RMD. Begin by checking in with boomer clients on how they plan to use their RMD as a part of their income. Clients can choose to invest it, spend it or gift it, but they need to think it through. It is critical to note that the federal excise tax for not taking an RMD is 50 percent of the amount that should have been distributed but was not. (As always, encourage them to contact their tax advisor to decide which taxation issues may apply.)

By design, the RMD becomes part of annual income regardless if clients spend it or invest it, to ensure taxes are paid. Depending upon their retirement income plan, clients may need your help choosing what to do. If they have enough income now, one option would be to take it and invest the money into a nonqualified account where it has the potential to grow and be used at a later date. Note that those with a nonqualified account will also need to pay taxes on interest, gains or capital gains earned depending upon the type of account. Another option to explore is to delay taking the first RMD payment from an IRA in the year the owner turns 70 ½. This may be helpful if clients expect to have lower income next year (for example, if your client or their spouse is retiring). But, if they delay the first payment they will need to take two payments next year.

2. Consider charitable distributions. There are instances where clients don’t want their RMD to be taxed or to become part of their income. In this case, there is a special rule they can look into—the qualified charitable distribution (QCD). This rule states that those age 70 ½ or older can directly send up to $100,000 of qualified money to a qualified charity and the money will not be taxed. This may also be a good option if your clients are trying to manage their tax bracket. QCDs from a traditional IRA count toward satisfying the RMD. But, these charitable distributions don’t qualify for charitable income tax deductions.

3. “Last call” for Social Security. If your clients have delayed taking Social Security payments, once they hit age 70, they should start. At this point, the Social Security payment they receive will hit its maximum amount. In addition to an RMD, once your boomer clients reach age 70, they will want to discuss Social Security tax issues with a tax advisor to fully understand the effects on their bottom line income.

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