11/8: Required Minimum Distributions

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Episode Transcript

Speaker 1 (00:03):
Hello, and welcome to Money Talks with Terry Sandbold and
Blake Sandbold. And this topic, if you don't know what
it is, could sound really like arcane, but it applies
to so many people.

Speaker 2 (00:15):
Terry, well, it does, and it can sneak up on
you if you're not paying attention to. So one of
the things when you're in regards to your financial planning
and retirement planning, one topic that will come up if
you do have a qualified or pre tax retirement plan
is what's called required minimum distributions, or as we simply

(00:37):
call it, our mds. So what that pertains to is
when you sit and look at your future, there's many
things to look at on what you should spend, how
you should spend it, what money to spend first as
you get to retirement and rm ds, what it is
is it's the minimum amount individuals must withdraw annually from

(00:59):
the retirement accounts such as a traditional IRA and four
O one K starting at age seventy three, and that
was a change as of the Secure Act two point
oh Secure two point oh Act in twenty thirty three,
that is changing to age seventy five. So in simple terms,

(01:21):
what that means and we'll go through this in detail.
But when you do get to age seventy three, let's
say you have a you've been successful, you have a
an IRA that it might have been a rollover of
a four and K or whatever, and now it's a
traditional or pre tax IRA. What you have is the

(01:41):
required minimum distribution set by government, set by IRIS regulations.
You have to take so many dollars out or a
certain percentage out of that pot of money. If you
do not do that, you will be dealing with the
penalty and still the tax and the penalty on that.
We'll bring it up multiple times during the show. But

(02:03):
the penalty has been reduced to twenty five percent, and
I say reduced it used to be a fifty percent
penalty plus the tax on it.

Speaker 1 (02:13):
That is so well, that's awesome, but that was so insane.

Speaker 2 (02:17):
Yeah. So in simple terms, I say, IRIS wants your
money before you die. They want their tax money before
you get It's kind of the simple structure there. So
they're forcing you to take distributions even if you don't
need the income at that point, but you do have
to do that. Everybody has the same rule, and it
does pertain to traditional iras. For traditional four to one

(02:41):
k's pre tax qualified plans and we can help you
really look at those and help you determine what that is.
And the reason we're bringing it up this time of
the year is you can do it anytime during the
calendar year, but if you don't do it during that
calendar year when you're required to do that, that's where
the text and the penalty come into play. And we've

(03:05):
had stories about this. When the rules it used to
be a younger age seventy, it got pushed out to
seventy three, and now in twenty thirty three it's changing
to seventy five. So this is a very important part
of your overall planning when you get to retirement income
distribution strategies. So we thought it would be a very

(03:25):
important topic. Some of you are there listening, they say, gosh,
I didn't know I had to do that. How much
time do I have left? So that's why we thought
we would do this today.

Speaker 1 (03:36):
Awesome, No, do we have a money talxmailer of the
week to go along with us, because there's a lot
of intricacies to this topic.

Speaker 3 (03:43):
We do, so we've got a great calculator actually to
help calculate what your r and D is for the
current year if you do have one, so we can
send out a link to that, or you can go
on our website to find the link as well. But yeah,
if you'd like to receive that or have a conversation
with one of our team members about what your rm
D is and how to calculate that for both traditional

(04:05):
iras four one ks or inherited iras, which, as we'll discuss,
there's been a lot of changes to rules, a lot
of confusion out there on that. Give our office a
call nine five two five four four two eight three
seven or online at sambold FG dot com.

Speaker 2 (04:22):
And I can't help myself but bringing up this story Kelly,
that we had talked about numerous times in the past,
where oh, yeah, one one of our listeners called in
and he says, uh, yeah, I think I understand that
R and D thing. So I got to rm D. Ah,
So I took all my four one K or all
his IRA out because he thought that's how the rule worked,

(04:44):
you had to take it out. Well, you have to
take a required minimum amount, not all of it out,
and he had done that where he could not reverse it.
He had too much time had had went by, so
he could not correct that. But he was on the
line and he wanted to get into details live on

(05:05):
the air. Oh yeah, And we said, give our producer
your phone number, we'll call you and talk you through
this on Monday and go through your specific details. Because
he thought he med made the right decision. But you
don't want to make the wrong decision on this by
any means.

Speaker 1 (05:21):
And I got to tell you, Terry, it was just
you and me in the studio that day, and when
the gravity of what was going on what he was
describing set it was one of those moments where you're
just sitting there going we got to oh, oh, you know.

Speaker 2 (05:36):
We need to see if we can correct this. But
because time had elapsed too far, I was not able
to be corrected. But that's why we always say get
the information up front, then make the decision on what
to do. And that's why we suggest working with a
financial planning group such as ours to understand all of
the rules and regulations, how taxation works on your investments,

(05:58):
so how you're required minimum distributions do work, what those
amounts are, how it's calculated. If you have multiple accounts
at different locations, it gets more complex, we need to
look at that. You can aggregate them together and look
at that, but there are some rules on that as well,
so very very important to understand it. It's not just

(06:19):
a simple take the money out, You're fine. It's like
are you taking out the right amount? Are you taking
it from all of your accounts? What accounts should you
use for your retirement income planning? And it could be
part of that too, and later on the show, there
are ways that you can, under the required minimum distribution
use part of that to go directly to a charity

(06:40):
and you don't have to pay the tax, but you
have to do it a very specific way, so then
people may not be where they can even do that.
It's something that we can sit down with you, look
at your situation, find out where you want those dollars
to go, and then see if it does qualify for
you to do that. I can save you a lot
of money on taxes doing it that way as well,

(07:02):
so the planning process doesn't have to be complex for you.
We can do the complex part and translate it to you.
In that case, we have some that are very involved
want to see you know, the engineer type that is
looking at every penny, every dollar, every tax strategy, all
the conversion options, all these different types of things. Not

(07:26):
everybody wants to do that by themselves. So that's why
we are in the business. That's why we would help
thousands of people over the last almost forty years now,
and we look forward to talking to teach and every
one of you listening, and a lot of times the
thing that does stop people is just the procrastination of
not taking the next step. So rm ds are a

(07:48):
very important part of retirement planning, and that's why we
wanted to talk about it today because we're coming up
to the end of the year.

Speaker 1 (07:56):
Absolutely, and you know, it's kind of a wild thing
to realize when somebody, you know, you save up your
money and you maybe get some guidance on how to
plan for retirement, but it's really kind of wild to
find out that you need professional help to figure out
how to get back at it later too, you know.

Speaker 4 (08:14):
I mean, yeah, you know, I think you're right.

Speaker 3 (08:18):
I mean, I think there is such a notion while
I say, now it's my piggy bank and I'll just
draw on it.

Speaker 4 (08:22):
Yeah, and yeah, it's not that simple. I mean, there's you.

Speaker 3 (08:26):
Know, and We've had a number that we've met with
the last couple of weeks and it's it's helped walk
through where they had worked with a financial advisor before.
And you start talking about, well, here's other options we
could look at, here's other types of ideas, and it's like, well,
I didn't even know to think of that in the past.

Speaker 4 (08:41):
And you know that that's where we try.

Speaker 3 (08:43):
To step in an add value saying, you know, here's
here's experiences that we've seen in the past, here's different strategies.
How can we try to make this more efficient and
leverage your assets further?

Speaker 1 (08:54):
Yeah, And the other aspect to this, at least from
the lay person standpoint, meaning me on this is r MD.

Speaker 5 (09:00):
Well, it doesn't mean our doctors.

Speaker 1 (09:01):
I mean, it's this thing that you have to do
and it can be really a big deal if you don't.
But it does stress the back too. Terry that, like
the planning doesn't end once you quit working and you
step into the retirement phase. You still have to work
with all these numbers and make sure that you're utilizing
everything correctly.

Speaker 2 (09:18):
Oh. Absolutely, And I think it's I mean when I
started the company all the way back, my first ten clients.
Seven of them wanted to talk about retirement planning, So
I gravitated into that market immediately and we just kept
on going as a company though direction So that's one
of our biggest pieces of what we do. But there's
a lot under the title of retirement planning, Like was saying,

(09:41):
the accumulation Everybody likes to talk about the accumulation side,
which is very, very key, and we do the money
management for thousands of people nationwide. The other side is
when you get to retirement, though, how do you spend
those dollars in the most tax efficient way? Because some
investments will have capital gains tax rates, some will have

(10:02):
ordinary income tax rates. If you have roth IRA qualified
roth iras, those are income tax free distributions. So looking
at all of that, and then what do you spend
and what may you want to pass to the next generation.
So it's actually a planning process until you pass away,
and that it is the next generation. Are they going

(10:24):
to reap the rewards from you doing a good job
of planning or are they going to end up with
a huge tax bill because you didn't do the state
planning process efficiently? So it's I always ask this question
and we asked this question. As you're doing retirement planning,
we look at what you need that wise, and then

(10:45):
how can we make it the most tax efficient on
what to take out from a growth standpoint to net
what you need. But then the other part of that
is how big of a legacy or footprint do you
want to leave when you pass. So this is a
ongoing strategy year after year after year, and because people
are living longer and longer, we're seeing clients doing reviews

(11:08):
that are in their eighties and nineties now and they're
still being involved in the planning process. Some might not
be able to do it as well, but that's our
job to help throughout their whole lifetime.

Speaker 1 (11:23):
And that's what the entire show today is about. And
we'll have more money Talks in just a moment. It's
Money Talks with Terry Sandbold and Blake Sandbold and today Terry,

(11:46):
we're talking about RMD's required minimum distributions. And it seems
like a simple, straightforward thing.

Speaker 5 (11:52):
Not so much.

Speaker 2 (11:54):
Not so much, especially if you're not aware of how
it works. And the thing that's important is in today's
busines world and you think about this, you have a
requirement to take out money from your retirement plans such
as an IRA or four oh one K once you
attain age seventy three AR or older, and that has
to be done during the calendar year each year. If

(12:16):
you do not, again, that is a taxable event, plus
a twenty five percent penalty on that amount that was
not taken out. So when you think about that, you
could end up losing more than half of that distribution
amount adding those two numbers together. So why do they exist?
They are the government's way of ensuring that individuals eventually
pay taxes on their tax deferred retirement savings. Or I

(12:40):
just say they want their money before you die. I'll
just simplify it. Well, that's the easiest way to play
simply put Yeah, so again, who has affected traditional iras
including annuities four oh one k's four O three b's
roth irays differ, meaning that you do not have to
take distributions on your own rot diyray. There are different

(13:05):
rules on inherited I rays though, blake Hip, you want
to cover a little bit of that.

Speaker 4 (13:09):
Yeah, and this is a key part.

Speaker 3 (13:11):
So this changed with the most recent Secure Act, and
there was a lot of confusion around that because the
change happened in twenty twenty and the IRS didn't come
out and confirm the change until twenty twenty four, so you.

Speaker 4 (13:26):
Know, go figure on some of thats.

Speaker 3 (13:28):
So there were a couple of nuances in there that
they kind of left ambiguous. So there are a lot
of broker's houses, clearing firms, et cetera, trying to figure
out what exactly they meant. But they did kind of
give an updated guidance on it last summer. The nice
thing is they said if you didn't follow exactly our interpretation,
you won't be penalized the last four years, so that

(13:51):
was very generous.

Speaker 5 (13:52):
Hell Olijah.

Speaker 3 (13:54):
But here's essentially three key buckets to be looking at.
Non spouse This would be the most common, so you
think about it like a child or something like that.
Inheriting an IRA four oh one k roth type dollars.
So most have a ten year rule. This replaces the
lifetime rule where you could withdraw it over your lifetime

(14:15):
with annual arm and ds, or the five year rule
where you had five years to take the funds out
in kind of any installment, but just depleted over that timeframe.
So now it says the account must be fully withdrawn
by December thirty first of the tenth year after the
owner's death. So here's where there's a couple of distinguishing points.
If the owner was already taken r and ds or

(14:38):
at what's considered the required beginning date, that's what the
R and D age is required beginning date is a
key nuance in there. Annual ARM and d's are required
during that ten year period, So you have an annual
portion that you have to take out every year. For
most people, it's not going to be equal, meaning that
that ten years is spread evenly. Between those ten years.
You know, it's usually a much smaller amount on an

(14:59):
annual because the space boss of your life expectancy for
that during that ten year period. But that's where I think,
you know, looking at financial planning is really important. Balance
again paid by the end of the tenth year. If
the owner was not yet taking r and ds or
it had not rereached the required beginning date, annual r

(15:19):
and ds are not required. Count still has to be
fully depleted by the end of the tenth year. So
a concept on that as an example would be if
someone passed away with an IRA asset and they were
or sixty years old, and you know, a child in
their thirties inherited the assets. They would not have an
annual r and D, but they would have to have

(15:40):
the funds fully depleted by the end of that tenth year.
So it means they could take out any amount that
they wanted during that time frame, but by end of
ten years just have to have that depleted. Now where
the required beginning date is important is you think about
roth iras as Terry had mentioned, you don't have a
required beginning date. You never have to have an from that.

(16:01):
So that's what sentially what got confirmed. The way the
IRS put this out is that wrath irays, regardless of
the original account owners age, do not have an annual
RMD for inherited people, but you do have to have
the rath iray depleted at the end of that ten
years or by the end of that ten years for
the beneficiary.

Speaker 1 (16:21):
For the beneficiary, correct, So can I just ask in
general terms like, can you guys give us a scenario
of what it might look like in each case that
you just laid out there about that ten year period,
what might a beneficiary need to plan around and do
with it?

Speaker 5 (16:37):
And can you can you walk us through.

Speaker 2 (16:39):
Sure.

Speaker 3 (16:40):
So let's say under the first scenario, original account holder
is eighty years old, they've got half million dollars in
an IRA, okay. And so let's say someone their child,
let's say is fifty five years old, and they inherit
the assets. They would look at that and say, we
would have to go to this handy calculator that we

(17:02):
have and plot it out and say, there's an annual
number that I need to pull out every single year
a couple percent on that based off my life expectancy
by the time I'm sixty five, So ten years later,
I need to have that entire half million dollars depleted
from the account, plus whatever growth happens. So that account

(17:22):
needs to be zeroed out during that over that timeframe. Strategically.
You know, how you can think about it for someone
is say that fifty five year old wanted to retire
at age sixty. Well, you know, from sixty to sixty
five they're probably going to be in a lower tax bracket.
So maybe those first five years we do some financial

(17:43):
planning and say it makes sense to just take the
minimum required minimum.

Speaker 4 (17:47):
Distribution during those years and.

Speaker 3 (17:49):
Back in and take more during your lower income years
because that's all taxes ordinary income, so that that could
be a first scenario. Second scenario is again that original
account holders sixty, they reached required beginning date, which is
seventy three currently for some of that age today, that'd
be seventy five. Their child again thirty five years old

(18:10):
inherits the assets half million dollars in the same scenario.
In this case, they do not have an annular requirement
of distribution, but by the end of ten years they
have to start taking that money out. Now, let's go
to that first scenario again, original account order account holder
has a half million dollars in a roth I array,

(18:30):
that fifty five year old inherits it. They don't have
to take anything out any year unless they want to,
but by the time they're sixty five, they have to
take all of that out plus the growth. So in
a case like that, we typically say, if you don't
need it, let that keep growing. It's tax free growth
still for you in that situation, so use the WROTH

(18:50):
for your advantage. So it's be the key scenarios to
look at their different The second scenario their second rule
surviving spouse. You get an option on this, so you
can treat the IRA as your own, so you could
essentially say, my spouse inherited they were sixty five years old,
I'm sixty four years old. I'm going to just roll

(19:10):
the assets into my IRA and you treat it like
your own going forward from there, so that that can
be pretty easy.

Speaker 2 (19:18):
Treat it on your.

Speaker 4 (19:18):
Own life expectancy.

Speaker 3 (19:20):
A different scenario that you can do, and this is
where some of the planning comes in, is you don't
have to make that change right away. So what if
your spouse was sixty years old and you're fifty five
as an example, well, you know you can't draw from
your IRA till you're fifty nine and a half. So
what you could do as an example is you could say,

(19:41):
I'm going to treat this as an inherited IRA for
four and a half years, where I can get penalty
free withdrawals from that, and then when I turn fifty
nine and a half, I can switch that over to
my own IRA and then I don't have to take
annual moans out. I can just do it when I
want to. But I'm of age, so there's planning to it,
and you can only make that change once, so you

(20:01):
can't bring it to your own and then put it
back and inherited, but you can go inherit it to
your own, so very very important planning distinction.

Speaker 2 (20:09):
There absolutely there are three real good reasons why to
contact a financial advisor. Just going through this in detail,
it sure is.

Speaker 1 (20:19):
And we've got so much more on this, the strategy,
the requirements and what you need to know coming up
on Money Talks. Welcome back to Money Talks with Terry
Sandbold and Blake Sandbold and guys. We're talking today about

(20:40):
required minimum distributions and it's not a one single faceted topic.

Speaker 4 (20:46):
No, there's a lot to it.

Speaker 3 (20:48):
You know, whether it's a required minimum distribution on your
own accounts to your own assets, which if you have one,
do you know they're by December thirty first. So that's
why we thought we'd talk about it right now, make
sure we're all well informed.

Speaker 4 (21:02):
But there's a lot of changing.

Speaker 3 (21:03):
Rules for a few inherent accounts and you know, this
is something that we're having conversations with our clients on
both ends of the spectrum essentially, you know, for for
older clients who have IRA roth IRA four own k assets,
we're going through and explaining to them what it means
and what it can mean for their their own life
as well as their beneficiaries, because a lot you know

(21:25):
they want to you know, you want to maximize the
net impact, as Terry said, and whether that's to yourself
or the beneficiaries. So you know, I don't think anyone
wants to give more to the government than.

Speaker 4 (21:36):
They than they need to on things, So.

Speaker 3 (21:40):
It's important to know those. But then we're also on
the flip side having conversations with clients children or or
just younger clients in general, and have said here, here's
what attack structure could look like when you inherit these
types of assets. You know, if your clients are not
parents of ours, talk to them about it, and you know,
make sure you're aligned and on the same page age

(22:00):
for what planning may look like. So the big part is,
as we mentioned, a lot of these rules change under
secure the Secure two point zero Act. So first change
was under Secure two point zero. The age of starting
r and DS has increased from seventy two to seventy
three for those born between nineteen fifty one and nineteen
fifty nine, and to age seventy five for those poor

(22:23):
nineteen sixty year later, so that ends up equating too.
If you're in twenty thirty three, the age will flip
to seventy five. So the penalty reductions is big as well.
Reduction of penalties for failing to take r and ds
down from wopping fifty percent to twenty five percent. Also,

(22:47):
the penalty is reduced if you take the full missed
r and D during the correction window. The penalty is
lowered to ten percent. So the correction window generally ends
on the last day of the second year tax here
following the when the rm D was missed, so there
is some time. You know, it's one of those things.
Again we'll see exactly how it fully ends up being interpreted,

(23:10):
but that's kind of the current stance on It. Not
a game you want to play, though, so it is
still important to get out ahead of it and understand
the rules. Yeah, calculated rm ds. Actually, rm ds are
calculated by dividing the retirement account balance on December thirty
first of the previous year based on a life expectancy

(23:33):
factor on IRS tables. So essentially, if you're looking at
this year for twenty twenty five, you would look at
December thirty first of twenty twenty four the closing value
on that and have a factor that you would multiply
out on there and you know I should add it
just so happens. We've got a great money Talks mail
over the week that is a link to a very

(23:54):
calculator that does that for you nice. So if you'd
like that link, give us called nine to five two
five four four two eight three seven or go online
to sample fg dot com. In addition to that, one
of our advisors would be happy to discuss that with
you and make sure you're informed about what is calculated there.

Speaker 2 (24:13):
Yeah, there's a lot of things to think about, and
you know it's be proactive instead of reactive on this.
We don't want you to call on December thirtieth and
say how do we do this again, especially if you're
working with somebody besides us, We might be able to
get it done on a twenty four hour basis. But
the thing you have to keep in mind is sometimes
you have to have a form filled out to specify

(24:36):
if you want taxes or not and have that signed
so that I mean it can You don't want to
wait till the last minute of the last day.

Speaker 3 (24:42):
Make sure you have cash available on the accounts it
be sent outs, et cetera.

Speaker 2 (24:45):
Yeah, yeah, so very important. So impact of rm ds
on retirement income, there's a lot of tax implications. Since
rm ds are treated as ordinary income, withdrawals are subject
to federal and state income taxes. So keep that in
mind when we're helping our clients. We'll do that for them.
We'll have to put it up right on the form

(25:07):
so you don't have to do any quarter release to
catch up on something like that. Important to know. Rm
ds could push retirees into higher tax brackets, and that's
why it's important to work and strategize how that's all
going to fit into your overall retirement income. You could
take that IRA, R and D and push it over
to a TOD or a brokerage account and keep it invested,

(25:29):
but you do have the tax obligation. So some people
think it has to go directly to them. It doesn't
have to go in their pocket to spend. We kind
of tease some of our retirees that you don't have
to spend it. If you don't need to spend it,
you know you can get it reinvested. So a lot
of them do reinvest it and keep it going and
then it becomes the cost basis on your new investment.

(25:51):
You don't have pay tax on that dollar amount, again,
only on the interest in the future when you do distributions,
but tax efficient withdrawal strategies in regards to that. It
helps to have both pre tax and after tax savings,
so you can strategize withdrawals from taxable, deferred and tax reaccounts.

(26:13):
So if you can keep if you want to keep
that totally invested in, don't shrink it by the tax bill.
If you have some other dollars that may make sense
to use with maybe a more conservative account, and you're
trying to grow this piece, you can pay the tax
bill and have the full amount go into your brokerage
account because you have other pockets of money to work with.

(26:34):
ROTH conversions can also be an important thing to consider.
You could consider converting traditional iras to roths before rm
ds begin. We do this with a lot of people.
Let's say that you retired at sixty five and you
have this huge IRA, say it was a big four
one K that you rolled into an IRA and looking

(26:58):
at conversions between sixty five and seventy three. So we'll
set up a strategy or plan and do increments over time,
getting money shifted over to the roth iirase category so
then your required amendment distribution is lower. And all of
this is all of the dollarge you converted are growing
under the text deferred in text free status for you

(27:20):
and your beneficiaries. So that's where the planning process comes in.
We dig into that a lot, and we are doing
that for a lot of people and it can make
a big difference for them. So you know, when you're
looking at that very important to work with somebody like
us to help you walk through the options you have
and then decide what to do. When we're putting together

(27:42):
retirement income cash flow projections, one of the things we
have is looking at is it better to do Roth
conversions or not. As we go forward, we can project
that out and show you the comparisons and look at
the long range potential of your sets and dollars. But

(28:02):
that can be very helpful because people where otherwise are
just maybe making a guess that it may be better,
but we can show them analytically why it could be
better to do that.

Speaker 3 (28:11):
Okay, perfect Well, that's the biggest part of this is
having the true facts and figures before you make any
of the key life changing decisions. And you know, the
more information they have, the better prepared.

Speaker 2 (28:22):
You're going to be.

Speaker 3 (28:25):
So next part we had here was strategies for managing
rm ds. And you know, Terry and I are very
involved a lot of charitable giving events, very involved with
a lot of nonprofits around here. It's one of my
personal designations Charter Advisor and philanthropy. So one thing that

(28:45):
we do talk to a lot of clients about is
qualified charitable contributions or qcds. Kind of interesting, so these
can still be taken at age seventy and a half
and above. They had always been what R and D
A was and for some reason, they just didn't change
the age when ourd ages increased to seventy two to
seventy three and soon to be seventy five. So it

(29:09):
allows you to donate up to one hundred and eight
thousand dollars a year directly from your IRA to qualified
charity or A five oh one C three nonprofits. This
counts towards your R and D but is non taxable,
So that's the huge thing, and it only works that
way if you give it direct If you take receipt
of the cash and.

Speaker 4 (29:28):
Then give it to the charity.

Speaker 3 (29:30):
That can still be a nice thing and a great donation,
but it doesn't get the tax exept benefit that doing
it this way does.

Speaker 2 (29:38):
So what we do there is we do we do
the paperwork on your behalf, and right on the paperwork
it shows the charity, the address, all of that and
that's where the distribution goes, so you're not in the
middle of that. So that's how they can qualify it
as a non taxable event. So it's very very key
to do it the right way. People try sometimes try

(29:59):
to do it help and don't understand if you get
in the middle of that, you do have the tax bill, right,
can we lucky on that?

Speaker 5 (30:07):
Yeah?

Speaker 1 (30:07):
So Blake, do me a favorite, give us the money
talmailer of the week again quick before we take a
break and let everybody know how that does need a
little guidance.

Speaker 3 (30:17):
Yeah, So if you like, we've got a great money
toys of the week, you can give us a call
and request this. It is actually a link to calculate
your required minimum distribution. So very very helpful. I think
as people are going through this can calculate inherit it
as well as traditional IRA rmds. If you'd like that,
give our office a call at nine five two five

(30:38):
four four two eight three seven or go online to
sampled fg dot com and one of our advisors would
be happy toss issue with that as well.

Speaker 1 (31:03):
It's money talks with Terry Sandbold and Blake Sandbold, and
you know, it's hard to believe you can spend an
hour talking about required minimum distributions, but quite honestly, I
don't think it's enough time.

Speaker 2 (31:14):
Well it's and as you plan for your future, it's
not enough time either because it's a year by year
event where people in retirement, so it doesn't go away
after one year or two years or three years. If
you're in retirement thirty years, you have thirty decisions to
look at, so very very important.

Speaker 3 (31:34):
So going through a lot of strategies for managing r
and ds. We had just talked about qualified Charitable Distributions qcds,
which are a very timely conversation for a lot of people.
Second is actually an option for delaying R and D
is from a four to one K and very important
how this works.

Speaker 4 (31:52):
But if you're still.

Speaker 3 (31:54):
Employed by company, have assets in a four to one
K working full time. As an example, you do not
have an annual R and D from your four to.

Speaker 2 (32:04):
One K dollars.

Speaker 3 (32:05):
So, as an example, if someone is eighty years old,
still working with a large company and has assets in
a four to one K, they do not have to
take an annual R and D just from those assets. Now,
what that does not mean is they're exempt from all
r and ds. If they had an IRA or FORM
or four oh one K or something of that nature,
those would have annual requirement OFUM distributions.

Speaker 4 (32:28):
So those are still in effect.

Speaker 3 (32:31):
One of the other common questions that I always get
on this is saying, well, you know, in the land
of freelance work, why don't I start my own business,
start a solo four oh one K and avoid r
and ds forever?

Speaker 4 (32:41):
Clever IRS got that that doesn't work. They always.

Speaker 2 (32:47):
Yep.

Speaker 3 (32:47):
Same with you know, step simple iras, et cetera. Just
as those are are more closely tied, those do not
have that exception. So it is more you know, a
four oh one K qualified retirement plan excuse me, employer
sponsored plan type mentality. Other thing, as Terry mentioned earlier,
moving funds to non qualified accounts if those are not

(33:10):
needed so if you did not need to spend it,
you know, it may not be the most efficient to
have senior checking savings accounts. You could look at an
after tax accounts, invest those and continue to grow. Additional
tool and we'll talk about this a little bit in
a couple of minutes. Agraating R and D s from
multiple accounts, So this is really a big point to

(33:31):
look at, and there's nuance as to how this needs
to be done.

Speaker 2 (33:35):
So you can.

Speaker 3 (33:36):
Aggregate them, but it needs to be from like titles,
meaning that an IRA cannot be grouped in and aggregated
with a four toh one K, so those do need
to be taken separately, but you can agregate iras collectively together.
So if you add two three iras, you can pool
the requirement of distribution from those and potentially take from

(33:57):
one account if you so choose. Very important to look
at the nuances there. I think that is very commonly misunderstood.

Speaker 1 (34:05):
Okay, solutely, And I have a question. So say somebody
does something funcy like that Blake, how on earth do
they report that tax wise? Is there a statement that
you get that you just you know, give to your
tax prepare because that's a lot of math.

Speaker 4 (34:22):
I think, yeah, it's a lot of math.

Speaker 3 (34:24):
I mean, it's that is what a financial advisor group
is helpful with and you know, helping and calculate and
tally them up. But yeah, I mean it's it really
is after the fact, as simple as working with your
cpat to show here's how much I took out and
they helped verify that, yes, this was taken out accurately,
and you did have tax held if you.

Speaker 4 (34:45):
So choose, et cetera.

Speaker 3 (34:47):
But I think working in conjunction with the team on.

Speaker 4 (34:50):
That is helpful.

Speaker 5 (34:51):
Yes, absolutely, Yeah.

Speaker 2 (34:55):
So I mean one of the things to it kind
of to considers avoiding common arm D mistakes, and there's
quite a few of the common ones, so I'll go
through a few of them real quick. One is forgetting
your arm D. Of course, missing an arm D can
result in a significant tax penalty. So a little bit
in review from the beginning of the show, it's important

(35:16):
to plan ahead. You can do automated distributions or work
with a financial planner to put together a strategy that
works for you. We do as a default at our company.
By November first we go through an audit all of
our clientele that are seventy three and older as a
general example here, if they have not accomplished that, we
are reaching out to them proactively and making sure that

(35:37):
they get that done. We have a lot of our
clients on a systematic system for each for a certain
time of the year if they want to do it
as a one time but we have an automated for
them as a backup so they don't have to think
about it each and every year. We're helping them think
about it as well. But it is your responsibility. It

(35:59):
is not the advice. There's responsibilities solely do that for you.
So it's very very important to understand that. Also, taking
a look at not coordinating arm ds with other retirement plans,
like Blake was talking about, failing to account for rm
ds when creating a retirement budget can affect cash flow
and long term financial planning. So if you're looking at

(36:21):
what we call a retirement income cash flow analysis, and
we're building a net income from all your different pieces
of investments and soil security, etc. And you forget and
you have to do the rm D that will go
on top of that, that might push you into a
higher tax bracket in some cases. So are you going
to use it as an income stream. Are you going

(36:42):
to shift it over? What is going to be the
usage of those dollars is very important in the planning process. Also,
failing to consider taxes is a big one. Some retirees
may not realize how much of their arm D will
go to taxes, especially if they have income from other sources.
Say you had a one million dollar IRA sitting out there,

(37:03):
and in the early stages it's between four and five
percent distribution requirement a minimum part, so that's forty to
fifty thousand dollars that you would have to take out.
And if you just had that sent to another investment
account for you, you forgot to take taxes out on
fifty thousand dollars. So you have to be careful about that.

(37:26):
All of a sudden you're trying to look where do
I get my tax money from on April fifteenth, So
very very important to look at that in advance, look
at planning that in advance. And also another one, do
not wait until late December. Processing delays can cause issues
with rm ds being satisfied on time. Sometimes you need
to have a signed form to do the cut to

(37:48):
accomplish this. If it's not systematically in order with your
financial advisor, and you might be traveling for the holidays
and where's the paperwork going to go? Are you going
to be able to sign? And you know, what's what's
the issue there? So don't leave it to the last minute.
Make sure you're working with the financial advisor.

Speaker 1 (38:08):
Yeah, big benefit to the system to doing it systematically.

Speaker 2 (38:11):
It sounds like, yeah, you can implement it into your
monthly income if you want to use it that way
as well, and then not have to take some of
your other investments out right.

Speaker 3 (38:21):
Yeah, it can be you know, automatically done into that
or automatically distributed to a brokerage account if you didn't
want to invest it. So I think the biggest thing
with that is making sure that there's a strategy in
place and you know, knowing what those options are. I
mean for a lot of our clients, that's you know,
it may be part of an early beginning of the
year planning conversation to say, here's what the R and

(38:43):
D is. Are there any adjustments that you have for
spending this year, Gifting that you want to do to
a nonprofit, gifting that you may want to do to children.
You know, Fortunately, the market's been good to a lot
of us, you know, the last couple of years. Unfortunately
that means that R and D S are like, we
can be larger, you know, so what do you want

(39:04):
to do with that? And where do you want those
dollars to go? And you know, just being intentional about
that plan. So it's as Terry mentioned it, it's not
a last minute conversation or last minute thought to say,
oh I forgot about that?

Speaker 4 (39:16):
What should I do with these funds now?

Speaker 3 (39:18):
So planning is while it's still in your time is
huge and vital. And you know, as we talked about,
there's so many year end things to think about. You know,
there's going to be a lot of year end tax
maneuvering to think from an investment standpoints, there's year in
considerations like this, there's year end giving to nonprofits to consider.
Annual gifts to children do need to be completed during

(39:41):
the annual calendar year. So I think it all really
wraps up by saying this is the right time to
reach out and meet with an advisor if you haven't
done so, or the right time to get a second opinion.
If some of these conversations may be new items that
you're hearing right now.

Speaker 5 (39:57):
There's only two months left in this year. Can't believe it?
Wild it is and it has been a wild one.

Speaker 2 (40:04):
It's very very key people. Do you ever have enough
time to do everything you want to do? So one
thing is our team is here to help with navigating
the planning aspect of taking your arm DS and give
us a call with any questions you may have regarding this.
So there is not a poor question, let's put it
that way. You want to have the answer before you

(40:25):
make the decisions on what to do next with your
financial future. And rm DS is a very important part
of the retirement income planning process. We work very diligently
with retirement planning for people of all ages and all stages.
We have advisors of all ages and stages of their
lives as well to team up with you. So give

(40:46):
us a call. You don't have to take it on
by yourself, and we do not want you to learn
by mistakes. And again, our number at Sampled Financial Group
is nine to five two five four four two eight
three seven. You can request a conversation online at SAMPLEFG
dot com.