• Fund grandchildren’s educations with IRA distributions. The latest tax reform laws allow utilization of 529 plans and other education savings plans to pay for elementary, secondary or postsecondary education.
• A Roth IRA conversion may be an option, especially now with the lower tax rates over the next eight years due to the Tax Cuts and Jobs Act of 2017. This option could help your clients manage their tax bracket to minimize taxes due. Note that RMD amounts cannot be converted.
• And finally, another option may be for your clients to minimize future RMD amounts by taking distributions before they are due. Reducing future RMDS may help minimize their effect on Social Security taxation, Medicare premiums and higher taxes during retirement.
As you can see, there is a lot for your clients to consider when making the most of their RMDs. Some proactive next steps you can take with them include reviewing their overall retirement income strategy to see where RMDs may play a role and also helping them consider various options for unneeded RMDs.
Start by identifying which clients are nearing the age for RMDs and have the retirement income conversation now. It’s never too early to help clients begin preparing strategies for their RMDs and overall retirement income needs.
*Allianz Life Insurance Company of North America conducted an online survey. The RMD Options Study was conducted in February/March 2018, and included a nationally representative sample of 805 respondents ages 65-75 with retirement savings of $500,000 if single or $750,000 if married and who are the primary decision maker or share equally in decision making.
Kelly LaVigne is VP of advanced markets for Allianz Life Insurance Company of North America.