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What are Required Minimum Distributions (RMDs)? - YouTube

Channel: Turning Point Wealth Management of Raymond James

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hi i'm lee and i'm marcia and we're

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turning point wealth management at

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raymond james today we're going to

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answer some questions that we get asked

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very often about what is an rmd

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what is an rmd great question i'm going

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to answer in this video okay uh some of

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the other questions we get are when do i

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have to take them which accounts do i

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have to take rmds from how much do i

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have to take out of these accounts

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all of this confusion well we can't boil

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it down to perfectly simple but we're

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gonna try and make it as easy to

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understand as possible

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so marcia what is an rmd

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many people have spent their working

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life saving for retirement and they save

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either an ira or a company-sponsored

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plan

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and all the years that you've put money

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away in those plans it's pre-tax

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and what happens is at

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some point the government says

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you have to take a required distribution

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and that is what's called a rmd required

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minimum distribution basically

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it means it's time to pay the piper

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the government

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gave you this deal with these retirement

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accounts that hey we'll let you invest

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what they call the whole dollar

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now when you earned it and not pay tax

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on it but sometime in the future you're

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going to have to take it out of this

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account and pay income tax on it then

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and that's when they get their money so

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great news you get to pay your taxes at

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age 72.

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and age 72 is important because

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that has recently changed yeah you might

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be seeing a lot of info out there still

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that says 70 and a half it used to be 70

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and a half but in 2019 they passed a law

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called the secure act that changed

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january 1st of 2020 effective for

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january 1st 2020 that changed the rmd

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age to 72. so

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that's the new age don't worry about 70

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and a half at 72. and the government did

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us a favor by saying you don't have to

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take your required minimum distribution

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now until age 72.

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so which accounts do you have to take

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these distributions from i knew you were

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going to ask me that question

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basically all accounts ira accounts sep

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accounts simple accounts

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employer-sponsored plans like 401ks

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you mainly have to take this

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distribution

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on every single account that you pay

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that you save for retirement except

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there are some types of iras like roth

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iras um that aren't subject to rmds and

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they can be very important for planning

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strategies but we'll get more on that

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later lee loves a good roth ira

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it sounds so silly to say but i do i

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know

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so how much is the rmd how do you figure

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out what that is well like most

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questions in the financial advising

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world

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the answer is it depends

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of course so the rmd is calculated based

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on your account balance and what the irs

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deems your life expectancy to be at

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whichever age you're at so it's

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different every year for every account

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there is an irs table that'll help you

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calculate that um and we have some more

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info on that that we'll share with you

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but basically it's going to change every

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year and you got to recalculate it and

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it gets complicated if you have more

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than one account

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there can be some shuffling around that

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happens there too well and it's not as

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clean as just getting the uh table and

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applying it because

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believe it or not there are exceptions

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to it and a bit of a game to be played

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with when you actually take it when you

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turn 72.

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so yeah as you probably getting the

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sense here this is something that

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getting the right strategy for can have

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a big impact on

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how much is left in those accounts and

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and what the growth is or the shrinkage

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um those accounts wind up being so it's

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time for my little story yeah you know i

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always like to tell a true life story so

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we had a new relationship with a client

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and he had a fairly sizable balance in

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his ira

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and diligently every january after he

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turned 72 he took his required amount

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so you might say well why did he do it

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that way he basically did it that way

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out of habit

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and what we talked about is if you keep

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the money in your ira all the way

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through december you get those tax

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deferred earnings on it until the end of

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the year and then you can take it in

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december and we including our

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assistant kim are very diligent about

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being sure nobody misses their rmd

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amounts in december so that's just one

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of the little games like don't take your

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rmd in january if you can defer it to

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december and we have a few more games

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don't we well that

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is the essence of what the strategy is

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around rmds you basically want to wait

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as long as possible to take these

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distributions so you get as much

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tax-free growth on that money as you can

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so depending on your situation how many

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different accounts that you have that

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are subject to rmds which exceptions you

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might qualify for um

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there can be a lot of different ways to

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skin this cat so if you have questions

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about that um we'll probably do some

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