2023 Tax Calendar
VIEWpoint Issue 2 | 2022
Inflation Reduction Act: Highlights of Key Changes for You and Yo...
After you reach age 70½, you must take annual required minimum distributions (RMDs) from your IRAs (except Roth IRAs) and, generally, from your defined contribution plans (such as 401(k) plans). You also could be required to take RMDs if you inherited a retirement plan (including Roth IRAs).
If you don’t comply — which usually requires taking the RMD by December 31 — you can owe a penalty equal to 50 percent of the amount you should have withdrawn but didn’t.
So, should you withdraw more than the RMD? Taking only RMDs generally is advantageous because of tax-deferred compounding. But a larger distribution in a year your tax bracket is low may save tax.
Be sure, however, to consider the lost future tax-deferred growth and, if applicable, whether the distribution could:
Also keep in mind that, while retirement plan distributions aren’t subject to the additional 0.9 percent Medicare tax or 3.8 percent net investment income tax (NIIT), they are included in your modified adjusted gross income (MAGI). That means they could trigger or increase the NIIT, because the thresholds for that tax are based on MAGI.
For more information on RMDs or tax-savings strategies for your retirement plan distributions, please contact our tax advisors.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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