With about four weeks left in the year, seniors are urged to engage in strategic financial planning, particularly paying attention to fulfilling their required minimum distributions while keeping an eye on the tax liability these withdrawals may incur. It is also opportune for seniors to explore any potential tax-saving strategies and leverage available tax deductions before the year concludes. Qualified Charitable Distributions often allow seniors to do both at the same time.
Federal tax law requires senior investors aged 72 or older to withdraw a mandated amount from their retirement accounts by the end of the year to avoid penalties. The required minimum distribution (RMD) is calculated as the value of the traditional retirement account on the last day of the prior year divided by the distribution period from the Uniform Lifetime Table, corresponding to the taxpayer’s attained age. RMDs apply to all employer-sponsored retirement plans and traditional IRAs, including IRA-based plans such as SEP IRAs and SIMPLE IRAs. Roth IRAs are not subject to required distributions while the owner is alive.
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