Upon reaching age 72, we must begin taking RMDs from our qualified plans. After years of funding these plans with pre-tax dollars and achieving tax-deferred growth, we are now obliged to pay income tax at ordinary rates on required withdrawals. We expected this. But, are there ways to ease the tax burden?
Qualified Charitable Distributions (QCD)
For those who make recurring annual charitable contributions, making those gifts from your IRA RMDs (up to $105,000 in 2024) enables you to avoid income taxes on RMDs made payable to charities outright—not to private or supporting foundations, donor-advised funds, or in exchange for income payable to you (e.g., a charitable gift annuity—CGA). So, making some or all of your charitable gifts in 2024 from your IRA RMD may provide tax-wise planning using distributions that would otherwise be taxable to you.
Lifetime Income Using an RMD
There is also now a way to receive income for life from your RMD. The Secure Act 2.0, effective as of January 1, 2023, allows you to use up to $53,000 of your RMD in 2024 to purchase one or more CGAs in this calendar year without liability for income taxes on the distribution. In effect, you will be substituting the investment in your IRA (which you had to liquidate to take your RMD) for a lifetime fixed-rate annuity amount for one or two lives (yours, and your spouse’s). Under current rules, you can only do this one time. Perhaps 2024 will be that year for you.
A CGA pays lifetime fixed-rate income and may be a very desirable investment to include in your retirement income planning—whether you use funds from your RMD, cash from your savings, or other income-producing investments.
You may want to check out a personalized, individual lifetime rate for a CGA.
May we show you how? Please contact us at plannedgiving@afhu.org or 212.607.8524. |
