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Across 401(k), IRA, 403(b) and 457(b) accounts, the IRS does not allow investors to maintain balances indefinitely. As such, federal law mandates that a minimum amount must be withdrawn each year, beginning at a certain age. This amount is a required minimum distribution, or RMD.
Your RMD age depends on the year you were born. Please note, you don’t have to take your first RMD until April 1 of the following year that you reach your RMD age. RMDs for subsequent years must be taken by Dec. 31.
If you do not take a distribution or if you withdraw less than the required amount, you may have to pay a penalty of up to 25% of the amount not taken. The penalty is reduced to 10% if the shortfall is corrected within a two-year window.
Because many retirees are in a lower federal income tax bracket before they are subject to the required minimum distributions (RMDs) rule, they have an opportunity to manage the impact of taxes on their income.
Here are few moves to consider:
During the time between when you stop working and when you begin taking required minimum distributions (RMDs), you could consider these opportunities with your financial advisor:
If you’re interested in providing charitable support, donating to a non-profit organization with a qualified charitable distribution (QCD) can help you achieve that goal. A QCD is a nontaxable distribution from an individual retirement account (IRA) directly to an eligible charity. You must be at least 70.5 years old to take advantage of the QCD strategy.
For taxpayers who have reached their RMD age, the QCD can be used as part, or all, of your RMD, removing the otherwise taxable RMD from your income, if done correctly. QCDs do not prevent a taxpayer from itemizing deductions, for the tax rules around QCDs talk to your tax professional.
Learn how you can use use your retirement assets to support causes that are important to you. An Ameriprise advisor can help you create a giving plan that takes many considerations into account. (3:01)
You could also consider donating appreciated stocks or assets. If you donate appreciated stock that you’ve held for more than a year, then you’ll generally be able to claim a potential charitable tax deduction for the full fair market value of the stock. This approach saves paying the capital-gains tax that would result if you instead sold the stock and donated the cash.
Taxes can impact your financial investments and savings outcomes, even outside of tax filing. Visit our Tax Center for helpful articles, FAQs and other resources.
Tax Center
Your Ameriprise financial advisor can help you balance your financial priorities with tax implications by helping you create a plan that meets both your personal and financial goals. Because your financial advisor understands your finances, they may also be able to recommend a tax professional for you. Working together, your Ameriprise financial advisor and your tax professional can help structure your investments and retirement distributions for tax efficiency.
As our loved one's age, it becomes increasingly important to monitor their well-being in various aspects of life, including their finances. Its not uncommon for seniors to struggle with financial management. For seniors experiencing cognitive decline or physical limitations, staying on top of finances can become a real challenge.Recognizing the signs that your senior loved one may need help with their finances is crucial for their financial stability and overall well-being. In this article, well explore some red flags that could indicate your loved one is having difficulty managing their finances and discuss some practical ways to offer support. Spot the SignsWhile everyones financial situation is unique, looking out for signs that your loved one is struggling can help you determine when intervention may be needed. Spotting unpaid bills, unopened mail, or overdue notices at your loved ones house may indicate that theyre having difficulty keeping track of their financial obligations.You may also notice unusual spending patterns or strange purchases that are out of character for your loved one. If your loved one is expressing concerns about budgeting or affording their basic needs, this could be another sign theyre having trouble managing their finances effectively.Consider Senior Living OptionsProblems with financial management may indicate memory problems or other age-related issues. For example, AgingCare recommends evaluating your loved ones health and functional abilities when you visit, looking for signs that they may need assisted living care.If you think your loved one needs care 24/7, start looking around online for nursing homes in your area. The earlier you start looking, the more time youll have to compare facility pricing, payment options, reviews, and amenities. For example, Frasier offers a variety of care options, from independent living to skilled nursing care, to meet the needs of seniors with varying care needs.Start a Conversation About MoneyWhen you notice signs that your loved one may be having financial trouble, its time to broach the subject. Conversations about money can be uncomfortable but do not delay, especially if your loved one is showing signs of cognitive decline. As early as possible, start asking questions to get a clearer picture of your loved ones finances. For example, ask where they keep their financial documents, how much debt they owe, who serves as their financial advisors, and what planning theyve done for the long term.Seek Guidance from a Financial Advisor If you dont feel comfortable offering financial advice to your loved one or are unsure how to best move forward with their financial situation, dont hesitate to speak to a professional. A certified financial advisor (CFA) will create a financial plan that aligns with your loved ones immediate and long-term financial goals. A financial advisor can also help your loved one avoid financial scams and exploitation.Consider looking for a financial advisor who specializes in senior finances, as these professionals will better understand planning for living on a fixed income, budgeting for long-term care, and investing in retirement accounts.Set Up Automated SystemsThanks to innovations in financial technology, managing money can be largely automated. Set up automated systems so your loved one has fewer financial matters to keep track of. For example, Clever Girl Finance explains that you can automate bill payments and contributions to savings and investment accounts. Start by signing your loved one up for automatic debits from creditors and service providers. For providers that dont offer this option, set up bill payments with your loved ones bank.Supporting a senior with money management requires a great deal of patience, compassion, and open communication. Remember that each situation is unique, and the level of support required by your loved one may vary from help paying monthly bills to long-term care in a skilled nursing facility. By keeping an eye out for potential financial struggles and acting promptly when you notice a need for support, you can ensure your loved one maintains a high quality of life.
If youve felt the sting of economic changes recently, its safe to say youre not alone. Whether your budget has been hit at the gas pump, in the grocery store, or on rent and utilities, we are all feeling the pressure to spend wisely and be risk averse with our investments. In contrast to younger generations who will likely bounce back from such economic fluctuations, our seniors are experiencing more urgency to protect their existing finances. The continuing impact of the economy on seniors in 2023 will depend on various factors, including the evolving state of the economy, government policies, and individual circumstances. Here are a few risks to be aware of and ways to protect your aging loved ones: Retirement savings: Many seniors rely on retirement savings, such as 401(k) plans and individual retirement accounts (IRAs), to support themselves in retirement. If the economy experiences a downturn, these savings could be negatively impacted, potentially leading to reduced retirement income for seniors. Finding a trusted financial advisor who can help protect investments and assets from risk is an excellent way to stay protected from significant retirement losses. Social Security benefits: Social Security is a vital source of income for many seniors. The Social Security Administration adjusts benefits annually based on changes in the cost of living, which is tied to the economy. If the economy experiences inflation or deflation, Social Security benefits could be impacted. Financial resources for seniors, such as Elderlife Financial Services, is a great way for seniors to stay educated on the best way to utilize assets such as Social Security benefits. Healthcare costs: Healthcare costs are a significant concern for many seniors, and the state of the economy can impact these costs. Rising healthcare costs could make it more difficult for seniors to afford medical care and prescription drugs. Many seniors seek guidance from prominent resources such as AARP, a nonprofit organization for seniors 50+, to learn more about how their medications will be impacted by economic changes and the best solutions to cut down on medical costs. Housing: Many seniors own their homes, and the value of those homes can be impacted by the state of the economy. A downturn in the housing market could make it more difficult for seniors to sell their homes if they need to downsize or move into a retirement community. Senior living communities, such as Harmony Senior Services, often partner with local realtors to offer seniors much needed insight on housing options. Overall, the economy can have a significant impact on seniors, and it's important for families to research solutions proactively through local resources such as senior living homes, retirement communities, financial planners, and realtors so all of the necessary information is ready when changes come.
If there is a sudden health-related event that forces a move for your loved one into a senior living community, time is of the essence in figuring out ways to meet the financial obligations. It is common for families to struggle with the upfront costs and be unprepared for move-in fees, monthly rent, and costs associated with making this move. One resource you can consider is using a bridge loan which provides access to the needed funds quickly so that you can get the senior living lifestyle your loved one wants and deserves. Meridian communities have partnered with Elderlife Financial in providing the Elderlife Bridge Loan which is a financial bridge, allowing you to pay for care now while waiting on permanent funding. When approved for a bridge loan, funds can be disbursed within 24 hours, which can help ease the burden on a family navigating difficult decisions. The borrowed funds can be paid back in just a few months or a little over a year, whenever the family funds that were previously tied up become available. Examples include receiving the proceeds from selling a home, liquidating retirement assets, or receiving the retroactive check from VA Benefits.To learn more about other resources to affording care, call us today. We are here for you!