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RMDs for Roth IRAs? When Is the Best Time to Take RMDs to Lower Tax Impact? - YMYW podcast - YouTube
Channel: Your Money, Your Wealth
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Alice from San Diego. "I have a Roth IRA and
will be 71 in February 2019. Am I required
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to take a required amount of money out every
month?" Alice, with a Roth IRA, there is no
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required minimum distributions. So you do
not have to take any money out of that account
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if you choose not to. Where, if you have a
traditional IRA, or a 401(k), that is where
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the required minimum distributions come into
play. So Roth IRAs are exempt from RMDs. So
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hopefully that made your day.
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Yeah. And I'll just add, so if you have a
regular traditional IRA. you just have to
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take out the RMD, required minimum distribution
amount, by year-end.
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Or you could take it out monthly.
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You could do it monthly but you don't have to.
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Sure. How do you take your RMDs? (laughs)
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(laughs) Wow! That's decades off. (laughs)
I will say one little caveat though, Alice,
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is at some point when you pass away and whoever
gets the Roth IRA, if they're not your spouse,
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they'll have to take a required minimum distribution
on an inherited, non-spousal inherited Roth
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IRA. But you don't have to take a required
distribution.
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All right. Maria from San Diego. "I just turned
70, and a friend told me I could start taking
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RMDs..."
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Now.
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"...now."
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I pre-read it because it was a typo. (laughs)
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I was gonna read "nor." (laughs)
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Thought I'd help you out. (laughs)
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Thank you. (laughs) "Now or in January." As
you can tell I don't pre-read these.
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(laughs) Because if he were to read it it
would be, "I just turned 70 and a friend told
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me I could start taking RMD nor or in January."
Yeah, nor sounds good to me. (laughs)
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I think it's now.
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Got it. "And then another one in 2020 to minimize
the impact of taxes. Is this true? What is
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the best time to start RMDs to lower tax impact?
Thank you, Maria. What say you, Big Al? So
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she just turned 70.
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So we're in 2018. So I'm going to assume by
just turning 70, you'll be probably 70 and
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a half next year in 2019. So you don't really
have to take your first RMD until 2019 - actually
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2020 to be exact, that you're required beginning
date would be April 1st of 2020. You agree
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with me so far?
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I do.
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OK. However, if you wait till 2020, you're
going to have to take two RMDs - one for 2019,
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one for 2020. So if you're trying not to pile
up too much income in one year, take one required
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minimum distribution in 2019 and one in 2020,
and then keep on going.
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Yep. So your friend was accurate. But what
is the best time to start RMDs to lower tax
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impact? Well, I think if you're 70 now, Maria,
you might want to look, at how much income
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do you have? You might want to start bleeding
some of these dollars out this year as well,
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before the end of the year.
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Depending on your tax bracket.
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Yes. Because we have very low tax brackets
right now. Let's say if you're in the 12%
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tax bracket, I don't know, maybe you fill
up that 12% tax bracket. So you would want
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to take a distribution from that. Maybe you
convert that into a Roth IRA. So you can still
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stay in a very low tax bracket. That money
is out of the IRA, now it's in a Roth IRA.
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There is no required minimum distribution
on Roth. So next year when you take your RMD
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it's going to be lower聽because you got more
money out the retirement account this year.
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Right. Completely agree.
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So a little bit of extra planning there for Maria.
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I'll just say, yeah, that's right, Joe.
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Hey, that's right, Al. You are correct, sir!
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