I will be subject to RMD in late 2017. What should I do with the RMD money?

As of now I am comfortable with my income and no major liabilities.

Asked by Michael

4 Answers

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Answered by Joshua Koch, Financial Adviser in Lehighton, PA
HI Michael! I typically ask the question, Are you taking the RMD because you want to, have to, or need to? Your specific situation will determine where these dollars should go. Some people need these dollars for expenses, some want to have fun with it, and some have no need for the extra income. For those who do not need the additional taxable income, reallocating these to a nonqualified investment or leveraging life insurance can be a great way to start legacy planning. | 04.21.16 @ 16:22
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
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Answered by Michael
I will have to take the RMD at 701/2 in Feb 2017. As of now I do not need all of the income. I have had life insurance since 1987. I am thinking about some home improvements with some of this income. | 04.21.16 @ 18:31
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simonsays — Great question Michael, set aside a few dollars for income taxes and save the remaining money for your future and/or do something special with it. Maybe gifts to children / grandchildren or a family vacation, you worked hard for these dollars so live life to the fullest . | 04.26.16 @ 20:24
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
Michael, I would have to agree with Joshua, there is not a lot of options to reinvest the excess money into. I see you want to do some home improvements and that is great, however the RMD schedule set by the IRS is projected to last until you are age 120 and really doesn't start declining in overall distribution until mid to late 80's. My point is you may run out of home improvement projects and they may not take all of the forced income you will have to take. If you leverage the excess income with life insurance you can create a tax free asset that you can utilize while your still living and when you do pass you will leave a tax free asset that is greater than the actual value of the cash inside the plan. With the current tax bracket being the 5th lowest in US History and close to a 20 Trillion dollar deficit we can only estimate future taxes to much greater. Having a tax free bucket of money both in life and death would be beneficial. If you went the traditional taxable (non-qualified) portfolio you will at least have access to monies that are not 100% taxable when you access them for future needs and depending on how this money is invested your heirs will get a step up in cost basis when you pass. | 04.26.16 @ 20:17
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
I say if all of your living and estate requirements are covered then use it towards a bucket list. Make sure your IRA is managed to protect principal well. | 04.27.16 @ 16:41
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$commenter.renderDisplayableName() — {comment} | 12.08.16 @ 20:39
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