Reducing Tax Liability on an RMD

RMDs are Required Minimum Distributions you must take every year from your retirement savings accounts, including traditional IRAs, and employer-sponsored plans such as a 401(k) or 403(b), starting at age 72.

  • If you’re turning 72 this year and taking your first RMD, you have until April 1, 2022, to do so. For each subsequent year, your RMD must be taken by December 31.
  • If you’re older than 72, you must take your RMD by December 31 each year.
  • Roth IRAs are not subject to RMDs.

What’s the difference between 2020 and 2021 RMD requirements?

Last year, the RMD age increased from 70½ to 72 through the Setting Every Community Up for Security Enhancement (SECURE) Act, and RMDs were waived by the CARES Act.

There is no longer an RMD waiver for 2021. As a result, anyone age 72 or older as of December 31, 2021, must take their RMD by year-end to avoid the 50% penalty―unless this is your first RMD, then you have until April 1, 2022.

What if I don’t need the RMD assets?

You may donate up to $100,000 annually to qualified charities such as FGC. Generally, qualified charitable distributions (QCD) aren’t subject to ordinary federal income taxes. As a result, they’re excluded from your taxable income.

How are RMDs calculated?

Calculating RMD amounts can be complicated, so please consult a financial advisor.

Learn more about making a charitable gift by making a distribution through your IRA here.

October 2021


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