Clients don’t have to take RMDs from a workplace retirement plan at age 70 1/2 if they are still working in that job, said Kitces. Advisors may want to consider a roll-in to the current workplace account.
“It only works if they’re not more than a 5 percent owner of the company their working for,” said Kitces. “If they want to completely dodge the RMDs, they’ll have to do it the year before they turn 70 1/2.”
This method of delaying RMDs may not be available to contract workers, said Kitces, as they are not usually qualified to participate in their employer’s retirement plan.
Another option open to retirement savers is participating in qualified longevity annuity contracts, or QLACs, a type of deferred annuity where money accumulates and payment of benefits does not begin until a later date.
Acceleration
“We can also manage RMDs with partial Roth conversions,” said Kitces. “Instead of waiting until clients are 70 1/2, start doing partial Roth conversions while they’re still in their 60s.”
Pinnacle Advisory currently uses partial Roth conversions, up to the top of the client’s current tax bracket, to preserve a client’s wealth from the tax impacts of an RMD. The result of the process is a client with smaller RMDs and a much larger Roth IRA, said Kitces
Charitable Giving
Clients can give qualified charitable donations up to $100,000 a year to offset the tax burden of their RMDs, but if they want their charitable donation to be counted as part of their RMD, it has to be done in one seamless process.
“If you want the qualified charitable donation to count as an RMD, don’t take the RMD earlier in the year on purpose,” said Kitces. “If you’ve already done your required minimum distribution, you can’t use it for a charitable contribution. Once you take the dollars out, you can’t put them back.”