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have an annuity question?

How to use your required minimum distribution if it isn’t needed

If you’re coming up on age 72, then you may soon be forced to withdraw money from a traditional IRA or retirement plan – regardless of whether or not you need these funds. But if you already have your living expenses covered by other income sources, how should you use this RMD money? There are several potential options available to you. But the best one(s) will depend on your age, risk tolerance, time frame until retirement, and your short- and long-term financial objectives.

What to Do with Unneeded RMD Money

Some of the most common strategies for making use of unneeded required minimum distribution funds can include the following:
  • Making charitable contributions
  • Paying the taxes on a Roth IRA conversion
  • Investing the money in a personal account or annuity
One option for these unneeded funds is to make qualified charitable contributions, which could allow you to replace up to $100,000 of your required minimum distribution from a personal traditional IRA account. In addition, a qualified charitable contribution will not count as income for you. So, it can help you to reduce your income taxes, too. If you opt to convert a traditional IRA to a Roth account, your unneeded required minimum distribution funds can pay some or all of the taxes that are due. These conversions are taxable events for the year(s) in which the money is transferred to the Roth IRA. However, while we are still in a relatively low tax rate environment, now may be a good time to make this move. Another strategy for your RMD funds could be to place them in a personal brokerage account and/or an annuity. Depending on the investments you choose in the brokerage account, you may be able to increase the assets, which in turn, could provide you with a larger “base” for generating retirement income in the future. If you would rather know the dollar amount of income you’ll be able to count on in the future – and you also want to ensure that cash flow will arrive for the remainder of your lifetime (regardless of how long that may be) – then a fixed or fixed indexed annuity could be an option. Further, if the annuity is deferred, meaning that it will not generate income right away, but rather at a time in the future, then you can also take advantage of tax deferred growth. Plus, unlike traditional IRAs, personal annuities do not impose required minimum distributions at any age. So, you could leave the money in an annuity for an indefinite period of time.

Are You Ready to Put Your Required Minimum Distribution Funds to Work?

Because there are many options to choose from when you have unneeded required minimum distribution money, it can be somewhat overwhelming. That’s why it is recommended that you first talk with a retirement planning expert before you make a commitment to any financial plan or product(s). At Annuity Gator, our mission is to educate consumers (and financial advisors) on how retirement income strategies work, as well as various tools that can be used for future cash flow generation. So, if you would like to discuss your objectives – as well as potential options for your needs – then feel free to contact Annuity Gator directly by calling (888) 440-2468 or by sending an email through our secure online contact form. We look forward to talking with you.

How to use your required minimum distribution if It isn’t needed

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