Demystifying RMDs: Timing, Amounts, and Tax Strategies

Episode Transcript

(00:00):
And our phone lines are open toyou right now if you've got questions for
our retirement planning professionals from Class Financial. The number to get on the air
this morning six oh eight three twoone thirteen ten. That's three two one
thirteen ten. We'll get you onthe air with CJ. Closs and Malia
Quavis. They are our retirement planningprofessionals from Class Financial. Their website Cossfinancial
dot com that's spelled k l aaS Financial dot com. Great website site

(00:25):
and resource to learn more about CossFinancial. Not only can you learn more
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That available to you at Cossfinancial dotcom k l aa S Financial dot

(00:48):
com. Dell phone number for theoffice right here in Madison six oh eight
four four two five six three seven. There is no charge for the initial
get to know you appointment at COSSFinancial. That conversation it will be complementary
to you again their number six oheight four four two five, six three
seven. The number to get onthe air six oh eight three two one
thirteen ten. That's six oh eightthree two one thirteen ten. Without any
further ado, we are joined thismorning by c J Class and Malia Quavis.

(01:11):
CJ, how are you doing thisweek? I'm doing great. Happy
to be here, Sean, It'sgreat to have you along. Malia,
how have you been? Very verygood? Good to be here as well.
It's it's always great to talk withboth of you, and we have
a This is one of those conversationsthis week that I feel like I could
say this probably every week. Notonly is it amazingly interesting, there is

(01:32):
a lot to know about just threelittle letters, RMD's required minimum distributions.
There is so much to learn aboutand it's an absolutely fascinating thing, and
we're going to talk about a littlebit about those this week with CJ and
Malie. Again. It should bean absolutely fantastic show. If you miss
any of the show, don't forgeyou can always listen back at classfinancial dot

(01:53):
com. Subscribe to the podcast rightthere class financial dot com. Before we
start talking about RMD's another cool featureof the program is the Class Quiz question
of the week, chance for youto win a twenty five dollars gift card
for something great this week, noexception, our friends from Class Financial will
provide a twenty five dollars gift cardto Sephora. Tell you a little bit
later how you can win that lateron in the program, Little tiptough if

(02:13):
you listen closely most of the time, just about every time both the question
and answer come up during each week'sprogram. And before we get rolling on
this week's conversation, let's actually takea look back at last week's show and
talk a little bit about the ClassQuiz question week at the question and answer
there from last week's show. Malia, Yes, So last week we had
a great conversation about what accounts youmight have out there that you can actually

(02:37):
see that are guaranteed. So we'retalking about FDIC insurance. We covered NCUA
insurance through the credit unions, sojust understanding what could be insured and what
is not insured. And our questionlast week was what is the maximum amount
the FDIC insurance will cover for asingle depositor account. Was it one hundred

(03:00):
and fifty thousand or up to twohundred and fifty thousand per single depositor account,
and Mike of Fitchburg was quick tothe phones. He correctly answered that
question. Answer is two hundred andfifty thousand dollars. So listen carefully today
for our question. You two canbe like Mike. Remember that song so

(03:20):
we use commercial Michael Jordan's took that'sstuck and everybody said this morning, and
I apologize. You can be likeMike just by paying close attention to the
program and being a fast dialer.A little bit later on the show,
speaking of being a fast dialer,you can take your time. We'd love
to hear from you. Tho thismorning gets you on the air. Six
eight three two one thirteen ten.That's six h eight three two one thirteen
ten. Love to have you joinus this morning with Money in Motion with

(03:43):
Class Financial. Were we talking,of course, when you think about retirement
planning and of course working with clientsto help them when it comes to distribution
of income from their investments. Whatdo folks need to know when it comes
to things like starting our md CJbring this up from time to time,
as people reach certain ages, thiscould come into play for them, and

(04:03):
so just you know, revisiting thistopic can be can be helpful, so,
as always, a quick education aboutrmds, which stands for required minimum
distributions. First, let's kind ofset the stage with these basics so you
understand what this is all about.So, along with the passing of the
Secure Act back in twenty twenty andthe subsequent passing of Secure Act two point

(04:28):
zero, there were some changes withregards to the required minimum distribution schedules.
Remember that rmds are designed to ensurethat investments in your iras do not grow
tax deferred forever. So pause onthat. Remember when you put money into
a retirement account IRA four three Bfour oh one K four fifty seven.
The most common way, or thequote unquote traditional way that we would contribute

(04:51):
to these was on a pre taxbasis. So we would put money in
and get to reduce our taxable incomefor the year, which would reduce our
tax line liability, and then thatwould grow on a tax deferred or compounded
basis until we get to retirement.So when we get to retirement, of
course, when we pull money out, there is an income tax due at
that time. This makes very basiclogic sense. Well, the question becomes

(05:15):
what if you don't need that moneynow? Now some of you are rolling
your eyes, like, oh,this is all the wealthy people. That
might be true, but you mightjust find that you don't need it until
later, or you don't need asmuch as you thought. That could be
because of an inheritance from a familymember. We actually run into it quite
often. You don't need as muchas you thought. And so therefore the
question becomes, can I just deferthat forever? And the answer is required

(05:39):
minimum distributions. No, the IRSwants to begin receiving the associated taxes that
have been deferred on these accounts atsome point. So here's some things to
know. Owners of iras must withdrawpart of their tax deferred savings each year
after reaching the age of seventy three. This for people born between January first

(06:00):
of nineteen fifty one to December thirtyfirst of nineteen fifty nine. Again,
I said, in current law,it is at age seventy three. Now
some of you are listening, going, no, it's not. I started
at seventy and a half. It'strue for you it used to be that,
but you're beyond seventy three already,right, So if if you were
born between January first of nineteen fiftyone and December thirty first to nineteen fifty

(06:24):
nine. Your RMD age is nowseventy three, but specifically, your first
required minimum distribution must now be takenby April first following the year you turn
age seventy three. This is knownas your RBD, your required beginning date.
So again, if I turn seventythree this year, technically I can

(06:47):
wait to draw that first rm Duntil April first of twenty twenty five next
year. But here's the tricky part. If you do that, if you
take this first year like FIR,then subsequent rmds must be completed by December
thirty first of every year thereafter.Let me repeat that, after your required

(07:10):
beginning date, subsequent rmds must becompleted by December thirty first each year thereafter.
What that means is that if youif you take that optionality to push
off your first year's RMD to Aprilfirst of the following year, that means
you'll have two that year if everybody'stracking that. So said another way,
typically we don't suggest people actually pushit out to the following year after they

(07:30):
turn seventy three unless there's some taxreason to do. So okay, moving
on from that nerdy topic. Sofor people born after January first of nineteen
sixty, your required minimum distribution ageis now seventy five. Let me repeat
that. This is big for peopleborn after January first of nineteen sixty and

(07:54):
I'm raising my hand. I wasborn after that. Your required minimum distribution
age is now aged seven five.Well, this is a big deal,
everybody. I mean, it usedto be seventy and a half. For
a long time it was seventy anda half, and now it's seventy five.
All this means is that you candefer the income tax consequences and continue
to get compound growth for a longerperiod of time, which is which is
good. It's a net win forsavers. Now, remember if you withdraw

(08:18):
less than your RMD, you mayowe a penalty. We'll get into this
a little bit later, but thisthis has varied over the years, and
the penalty as actually has actually comedown over time. Talking this morning with
CJ. Closs and Malia Quavis,they are our retirement planning professionals from Class
Financial. Our phone lines here atstation. They are open love to have
you join us if you've got aquestion for Malia and CJ. I got

(08:39):
to just pick up phone dial innow six eight three two one thirteen ten.
That's six h eight three two onethirteen ten. Love to have you
join us this morning. Don't forget. You can get to know Clause Financial
anytime online Colssfinancial dot com. That'sCoss k l aas Financial dot com.
Now only can you get to knowthe team. You can learn about the
separate divisions at COSS Financial. Alsosign up for the market Pulse newsletter at
coss financial dot com. They're toughnumber six O eight four four two five

(09:03):
six three seven. No charge forthat initial gates new the appointment tech costs
financial. It will be complementary toyou. Again, they're number six soh
eight four four two fifty six thirtyseven. What else do we need to
know, CJ. When it comesto required minimum distributions, well, pay
attention to the terminology there. Andby the way, I've had to teach
myself this as I've done more andmore studying in our industry and across other

(09:24):
industries. Is like pay attention tothe terms that are being used now in
the medical field. Often these areterms that none of us know how to
how to digest right there. They'relike Latin rooted terms and so we don't
know what they mean. But inthe case of this required minimum distribution,
so if somebody were to say tome or to you, well, can

(09:46):
I take more than that? Theanswer is read the term required minimum distribution.
So this is the minimum amount youmust switchdraw from your account. You
can always withdraw more, and remembersit's a required minimum distribution at a starting
age. That doesn't mean you can'tdraw before then. It just means if

(10:09):
you haven't been drawing by then,then a requiredum minimum distribution will apply.
So just remember it is a minimum, not a maximum, and it doesn't
mean you can't draw before that.It just means if you haven't been by
that time, you have to meetthe minimum. And furthermore, sometimes people
will say, well, what ifI am drawing at say seventy two,
but then I turn seventy three andI'm not drawing enough. I go,

(10:30):
well, again, read the definitionrequired minimum distribution. You must meet that
minimum distribution. Your withdrawals will beincluded in your taxable income. By the
way, so just remember that thisis part of the reason. Well,
this is the reason why this ispart of legislation is because Congress, the
IRS, the federal government wants tostart getting their tax revenue off of this.

(10:52):
So when you pull out that minimumit generally I'm saying generally, it
generally will be added to your taxableincome, except for any part that was
part of your basis or any partthat can be pulled out tax free,
such as qualified distributions from a wrothaccount or anything that goes to charities via

(11:13):
a qualified charitable distribution. But moreto come on that in just a little
bit. So when you think ofthe calculation, because some of you are
going, well, what is that? What is that minimum amount when I
turned seventy three? So the calculationof it for any year is the account
balance as of the end of theimmediate preceding calendar year. So just think

(11:33):
December thirty, first of say,last year, divided by a distribution period
from the IRS's uniform lifetime table,and the table gives you a life expectancy
factor. A separate table is usedif the sole beneficiary is your spouse is
the owner's spouse who is ten ormore years younger than you. But this

(11:56):
table can be found at Investor dotgov or at IRS dot gov. Just
go to either one of those websites, kind of look for the search feature
and type in RMD table or RMDworksheet anything like that. So these are
widely available tables that you can goto. But just remember December thirty,
first of the prior year, dividedby the number, which is a life

(12:18):
expectancy factor. We'll give you adollar amount, and that first year's RMD
dollar amount is somewhere around three pointseven percent. By the way, so
for every one hundred thousand dollars,it's about thirty seven hundred dollars of minimum
distribution as promised, This is interestingtime. There's a lot to this.
It's a really really good program.As always, if you missed any part

(12:39):
of today's show and you maybe wantsome more of those details, you can
always listen back at colssfinancial dot com. That's Klaas Financial dot com. Great
website and resource only listen back tothe podcast. Also sign up for the
weekly Market Pulse newsletter gets you tothe team gets No Cost Financial in their
separate division. Speaking of Cost Financial, their telephone number really needs you to
make that connection. All I gottajust pick uphone give a call six eight

(13:00):
four four two five six three seven. That call, that first apployment not
gonna cost you a thing at COSSFinancial, it will be complementary to you
again their number six oh eight fourfour two five six three seven. And
of course telephon number to get onthe air that is six oh eight three
two one thirteen ten. That's sixoh eight three two one thirteen ten.
Love to get you on with CJMaalia of Class Financial. We'll talk about

(13:22):
different account not all accounts, butsome there are ones that you need to
be aware of when it comes todistribution for rmds. With the details from
Malia and of course we will takeyour call next as Money in Motion with
Coss Financial continues here on thirteen tenwiv E and our phone lines are open
for you right now if you havequestions for Malia Quavis and CJ. Closs,

(13:43):
of course they come to us fromClass Financial. A telephone number to
get on the air six oh eightthree two one thirteen ten. That's six
oh eight three two one thirteen ten. The website for Class Financial Coss Financial
dot com that's k l aa SFinancial dot com. And their telephone numbers
six eight four four two five sixthree seven. No charge for that initial
get to know you appointment deck classfinancial. It will be complementary to you.

(14:07):
Again they're number six soh eight fourfour two five six three seven and
to get on the air six oheight three two one thirteen ten. That's
three two one thirteen ten. Talkingthis week about rmds required minimum distributions and
Malia from what accounts When it comesto those rm ds, would they need
to be distributed from? Yeah,that's a great question. And just just

(14:28):
for simplicity here, we want tomake sure that when people we do throw
around acronyms all day long here andso this morning we're talking about rmds required
minimum distributions. Sometimes we hear ofMrDs. That's minimum required distributions is all
the same, So I just wantto make sure everybody's on the same page.
But when we're talking about these minimumdistribution rules, Uh, the rmds

(14:52):
need to come out of the followingaccounts. Traditional iras, your step iras,
any simple iras, also any fourto oh one K plans from prior
employers, four h three B plansfrom prior employers, and four fifty seven
plans from prior employers also profit sharingplans and other defined contribution plans. Now

(15:18):
you'll notice, I said from prioremployers. So there's this exception. If
you're still working after the age ofseventy three, and you're in and you
actually have a four to one Kplan at that current employer, you are
not required to pull rmds from thatcurrent four to one K or four three
B. So case in point.In the last two weeks, I've had

(15:41):
two people who are so excited thatthey still work, and one of them
was seventy six years old. She'sbeen working at the same company as an
office manager for forty plus years,still contributing into her four oh one K,
and has not taken a single RMDfrom it because she doesn't have to.
And yesterday I met with an eightytwo year old who's been teaching for

(16:03):
fifty years. She also is workingand has not touched her required minimum distributions
because she doesn't have to. So, as we said, it's got to
be from a current employer's plan.Now, anything left behind an old employer's
plan, those are game to comeout as required minimum distributions. Now ROTH

(16:26):
accounts are different, and we've hadsome changes this year, but to be
specific, roth iras those do notrequire withdrawals until after the death of the
owner. Now, when those docome out as required minimum distributions, they
are not taxable as they come out, but they are required after the death.
But the difference that showed up thisyear was WROTH four to one case.

(16:49):
Previously, we would tell our listenersthat you would need to eventually move
the WROTH four oh one k intoa roth ira so you didn't have to
do required minimum distributions. What changedthis year is the IRS said rmds are
no longer required to come out ofWROTH four o one case. So that's
a big change because we're having alot of people move them over so they

(17:12):
could avoid being forced to take themoney out again. It always came out
not taxable, but obviously people don'tlike to be forced into situations they don't
like. It was very confusing,I know, it is, it is.
It is. Thank goodness we haveyou guys, our retirement planning professionals
from Class Financial to help us understandthis stuff. Great opportunity if you've got

(17:33):
a question, love to get youon the air with CJ and Malia all
I gotta do is give us callsix oh eight three two one thirteen ten.
That's three two one thirteen ten.Learn more about Class Financial the website
colssfinancial dot com and their telephone numbersix o eight four four two five six
three seven. No charge for thatinitial get to know appointment at Class Financial.
It will be complimentary to you againtheir number six oh eight four four
two five six three seven. So, Malia, how is the amount of

(17:57):
that RMD that required minimum distribution?How is that calculated annually? And does
that amount change every year? Andwhat if we forget to take it out?
Yeah, you would never do thatwould not mean yes. So there
are two changing parts of the equationevery year. First, I think your
age changes. Secondly, your accountbalance is on your retirement accounts change as

(18:21):
well. So they could be up, they could be down. They certainly
could be down because you did takea distribution out for that year. So
the equation is you take your Decemberthirty first, prior year retirement balance,
so you don't know it for nextyear yet it was from December thirty first
of twenty twenty three, and youdivide that number by a life expectancy factor.

(18:41):
And again you can use the uniformlifetime expectancy table. As CJ mentioned,
if you go to IRS dot govyou'll find an automatic RMD calculator.
But for simplicity, current table showsthat if you're turning seventy three and twenty
twenty four, you can take thataccount balance and you can divide it by
your life expectancy withdrawal factor, whichis currently twenty six point five. So

(19:06):
in essence, one hundred thousand dollarsmeans you'd have to distribute from your pre
tax accounts approximately thirty seven hundred dollarsthirty seven seventy three and twenty twenty four.
No, you would pay income taxeson that amount. So many times
people say, okay, so ifI distribute that, that means I'm going
to get the whole thirty seven seventythree, and you can, but there

(19:27):
will be tax due. That's thewhole point of required minimum distribution. So
like for our clients and many otheradvisors, we typically will withhold the necessary
tax forward that to the IRS sothat the following year you're not facing a
tax bill preferably. So that's howthat works. But some important RMD things

(19:49):
to know. If there's a youngerspouse involved and the soul and if they're
the sole beneficiary of your IRA forthe entire year and they are ten years
younger than you, they can actuallyyou can actually use the joint life expectancy
table, so that actually allows foryou to take a little bit less out
because obviously the spouse perhaps will livelonger because they're younger. So that's really

(20:14):
important to know because you want tobe able to stretch that money out as
much as possible. Another thing toknow, rmds are calculated separately for each
IRA, but they can be aggregatedwhen you start taking the money out,
meaning that you could have literally teniras and a separate calculation for each,
But the IRS doesn't care where youtake your RMD from as long as you

(20:38):
take the correct amount from. Somany times people will just take it from
a single IRA for the amount versuspro rata. And also keep in mind
if you delay that first RMD asCJ mentioned and double up that first year,
you have to look at your taxableincome because that could be significant.
So look carefully at your taxble incomeand the tax brackets are associated and plan

(21:02):
accordingly. And then finally, welike, we don't like the word penalty,
but this has really come down significantlynow. So if you fail to
take your R and D by thedeadline, which is December thirty first every
year, there is a twenty fivepercent penalty on the amount of the shortfall,
just the shortfall, and the penaltycan be further reduced if the taxpayer

(21:23):
takes the missdistributions in a specific timeframe. If the error is corrected within
two years, your penalty drops toten percent. Some cases, if you
missed it due to a mistake andyou can demonstrate that reasonable steps were taken
to resolve the issue, the IRSmay waive the penalty. I said,
may this is the IRS we're dealingwith, but please don't miss it.

(21:45):
If possible, work work with yourfinancial advisor accountant to make sure you get
those out in a timely fashion.Maybe the penalty may be a little better,
but it's still one of those ouchones that yeah, but we don't
like give them money back, No, not at all. As we talk
this morning with CJ. Class MaliaQuavis, they are our retirement planning professionals
from Class Financial. You can learnmore online the website colss financial dot com.

(22:07):
That's k L A A. SFinancial dot Com and their telephone number
six oh eight four four two fivesix three seven. No charge for that
initial get to know you appointment atClass Financial. It will be complementary to
you again their number six oh eightfour four two five six three seven.
What if you have an inherited IRA, what do you need to know when
it comes to r m DS.We'll got the details next as Money in
Motion with Class Financial continues here onthirteen ten. Wi B A talking with

(22:34):
our retirement planning professionals from Class Financial, Malia Quavis and CJ. Coss.
The website colss financial dot com.That's k l a A S Financial dot
com. There telephon number four fourtwo five six three seven, No charge
for the initial gets know your appointmentat COSS Financial. It is complementary to
you again that telephone number six oheight four four two five six three seven.

(22:56):
Talking this week about r m dsand there's probably some folks listening going
on, I've inherited one, whatdo I need to know then? And
an IRA? What do I needto know then about r MDS? CJ.
Yeah. So again it's fascinating becausethese simple concepts which begins with well,
hey, the irs, and thefederal government needs to run operations,

(23:18):
and so they need to eventually havehave taxes paid on these taxa four dollars.
That's a simple concept, right,But when you start applying it,
boy, oh boy, does itget complicated. So we already went through
a fair number of complications, whichis these ages for rmds are changing,
and the percentage and there's a tableand how do you calculate it and a

(23:40):
required beginning date and all these funthings. Well, here's kind of complexity
layer number two, which is,what if I inherit a retirement account,
how do require distributions begin Then?Well, let's jump into that. So
inherited iras have had some changes aswell with the passing of Secure Act one
and Secure Act two. So inheritediras are also subject to rmds. Typically,

(24:06):
if you inherited the account prior totwenty twenty, you're required to take
distributions based on your life expectancy ifyou are a non spouse. Let me
repeat that, if you inherited theaccount prior to twenty twenty, you're required
to take distributions based on your ownlife expectancy. Assuming you're a non spouse,

(24:27):
However, if you inherited an accountin twenty twenty or later and the
original owner had already reached their requiredbeginning date, which remember what is that
date, Well, it's when theirrmds would have started based on their age
April first of the year following thatas their require beginning date. So if

(24:47):
they had already reached their required beginningdate and you inherited this account after the
year twenty twenty, you will needto continue taking minimum distributions. And if
you are a non spouse, youhave have to have all that money out
within ten years. Okay, soagain think of it. I'm going to
focus on the big picture because I'llbe Frank on the air here trying to
give you all the calculations if thisis quite complex. So big picture,

(25:11):
If you inherited a retirement account priorto twenty twenty, and you are a
non spouse, you generally have totake minimum distributions over your life expectancy,
which could be forty fifty sixty years. It depends on when you inherit the
account. If you inherit the accounttwenty twenty or later and you are not
the spouse, generally speaking, youwill have to continue that minimum distribution if

(25:33):
the original owner had had minimum distributionsthemselves and all the money happy out within
ten years. And as you canimagine, woll whoa, whoa, whoa.
What if this is a million dollarIRA or a five hundred thousand dollars
IRA, does that mean I haveto be taking potentially hundreds of thousands of
dollars out potentially, yeah, potentially, And of course that gets added to

(25:55):
your taxable income as a beneficiary.So what I'd say to you all,
if you're listening to this, you'reprobably gonna want to talk to a financial
planner if you're inheriting large pre taxretirement accounts, because the when and the
how much that comes out of thataccount is pretty important. Now, I
keep saying non spouse, So ifyou were the spouse, then you have
some choices that everybody else does not. First, you could transfer the account

(26:21):
into your own IRA, and thenit's as though the money was always yours,
and you could begin taking required minimumdistributions in the year you turn seventy
three, as an example, Oryou can transfer your late spouses your decease
spouse's IRA into what's called an inheritedIRA. And if the owner's spouse chooses

(26:41):
to take the IRA as a beneficiaryrather than assuming it as their own.
They can choose when to begin takingr and ds on the on the basis
of their own life expectancy. Solet me again simplify this. If you
are a spouse and you are receivinga retirement account four one K four oh,
there would be IRA from a deceasedspouse, and you are under the
age of fifty nine and a half, you are generally going to want to

(27:04):
take that as an inherited IRA.You're not going to want to take it
over as your own. You're goingto want to put it into an inherited
IRA. Reason being is because youwant to have access to that without a
penalty. If you move it intoyour own IRA and your pre fifty nine
and a half, generally speaking,you won't be able to pull money out
until you reach that age fifty nineand a half. So goodness gracious,

(27:26):
Even as I'm explaining this, Ifeel like it's so com complex. I
hope what everybody's hearing is there's alot of rules around this. If you
are either fortunate or unfortunate enough toreceive one of these types of accounts in
twenty twenty or later. Make sureyou know the rules and that you abide
by them. Really important guidance there. As we talk with CJ. Claus

(27:48):
and Aliakuavis, there's an amazing topicwhen it comes to required minimum distributions are
mds. Of course, if you'vegot questions, you can always learn more
online classfinancial dot com. If numberfor Class financial six SOH eight four four
two five six three seven, nocharge that initially gets to know you appointment
at Class financially, it will becomplimentary to you again their number six SOH
eight four four two five six threeseven. So we've uh, we've talked

(28:12):
about r mds. We've talked abouttalked about a lot of the ins and
outs of that. And then there'sanother abbreviation I hear from time to time
qcds. And let's talk about rmdsand charitable giving and what do we feel
like we're going down a whole otherone here, CJ. We are yes.

(28:32):
If your heads aren't spinning enough,you know, strap in. But
let me let me encourage everybody,because I want to filter or couch what
this topic is about. So QCDhas qualified charitable distributions if you are charitably
inclined and you are getting near yourrequired minimum distribution age or more simply near

(28:56):
seventy and a half. If thatis you and you have a retirement account,
pay special attention here because this isa huge win for charities, a
huge win for you. So here'sthe concept. Qualified charitable distributions can begin
at age seventy and a half.And I know you're going wait wait,
wait, I thought rmds are outfurther. They are required minimum distributions are

(29:19):
being pushed out the age at whichyou must begin. Those required minimum distributions
are being pushed out to seventy threeand seventy five. However, that did
not get matched with the age atwhich you can do a qualified charitable distribution.
Fyi, qualified charitable distributions can onlycome out of iraras that cannot come
out of four to one case.And secondarily, you must literally be seventy

(29:44):
and a half, so it can'tbe the year in which you turn seventy
and a half. You must beseventy and a half or older in order
to qualify at the time you doa qualified charitable distribution. To put it
simply, you all know that ifyou pull money out of your pretax retirement
account and put it in your postor your checking account. That shows up
on your ten ninety nine as ataxable distribution and it increases your taxable income

(30:07):
and boom, you get hit withmarginal income taxes. However, if instead
of that, I take that moneyout and direct it to a charity,
that money, it does show upon my ten ninety nine. By the
way, it shows that I pulledthe money out, so it does kind
of count towards my minimum distribution,but it does not show up as taxable
income to me. Now, somepeople go, why does this matter,

(30:32):
I'll just give to the charity outof my checking account. Because remember everybody,
when you give to a charity outof your checking account, it shows
up in your schedule A, andyour schedule A is known as your itemized
deductions, and those itemized deductions betweenyour charitable giving, your mortgage interest,
your salt deductions, and your medicaldeductions. Of all those itemized deductions,

(30:53):
they must exceed be greater than yourstandard deduction, which your standard is HI.
These days, for many people oversixty five, this number is getting
up to thirty thousand dollars. Soif you're itemized don't exceed thirty grand.
Well, it says though you nevergave to a charity in the first place.
So here's the key. If youare over seventy and a half,

(31:15):
if you are giving to charities,and if you have a pretax retirement account,
you should absolutely be giving out ofyour IRA and not out of your
checking account. Let me repeat that. Gosh, I just I hope if
there's anything people here. If youare given to charities, if you are

(31:36):
over seventy and a half, andif you have a pre tax retirement account,
you should absolutely be giving out ofthat out of that IRA to the
charity instead of your checking account.Now you know what, even as I
say that I've got to give mydisclaimer, I think I really don't even
know a circumstance under which you wouldn't. But I don't like using absolute terms,

(31:57):
and I just did there, SoI think under no. Niney nine
point nine percent of the circumstances youshould. So long story short, talk
to your accountant, talk to yourfinancial advisor, and really slow down and
make sure that you are trying totake advantage of that qualified charitable distribution feature.
A really great win for everybody.But you got to make sure you
follow follow the guidance and the rulesand the guidelines. And as we talk

(32:19):
with CJ and Maleia, one ofthe great things is is that conversation.
I got to just give them acall at Colss Financial six oh eight four
four two five six three seven,no charge. Then you could know your
conversation at COSS Financial. It willbe complimentary to you. The website cossfinancial
dot com. That's coss k lAasfinancial dot com. I mentioned the telephone
number six soh eight four four twofive six three seven. Going to hold
on to that telephone, Oumber nowbecause it's time for the Coss Quiz Question

(32:42):
of the week. It works likethis, just a moment, I'll ask
you the Coss Quiz question a week. You will then have thirty minutes from
the today's program to call the ClassFinancial office right here in Madison at six
oh eight four four two five sixthree seven. If you are the first
call with correct answer, you winthis week's prize, which is a twenty
five dollars gift card. Two fourup. This week's Class Quiz question week,
is this true or false? Isit okay to withdraw more than the

(33:06):
required minimum amount from your iras eachyear. True or false telephone number six
oh eight four four two five sixthree seven first goal correct answer one that
twenty five dollars gift card two.Sephora dot forget as well. That's Class
Financial Office right here in Madison sixoh eight four four two five six three
seven on the website Class financial dotcom. That's Class k l a A
S Financial dot com. Cee Jmialia, it's always great chatting with both of

(33:30):
you, guys. Enjoy this fantasticday. Thanks. Sean News comes your
way next right here on thirteen tenWUIB eight