Making the Most of Your RMDs
Required minimum distributions (RMDs) are a key component of retirement income planning, whether you want them or not. If you’ve saved well for retirement, you might not need those funds to maintain your lifestyle. But since the IRS mandates that you take RMDs, why not put the money to good use?
In this week’s Retire Wiser with NBC Connecticut, Joel Johnson, CFP® shares a few strategic ways you can make the most of your RMDs for yourself and your family.
Covering Living Expenses or Paying Off Debt
Depending on your savings, budget, and other income, your RMD could be an essential source of funds for everyday expenses like groceries and utility bills. As the cost of living continues to rise, that extra money can offer some real peace of mind.
You can also use RMDs to pay down debt — whether it’s a large medical bill or even student loans for a family member. Reducing these monthly payments can free up cash and help you enjoy retirement with a little more financial freedom.
Reinvesting After-Tax Funds
If you’re looking to extend the longevity of your portfolio, consider reinvesting the after-tax money from your RMDs. This can be a smart way to keep your money working for you, especially if you aren’t relying on those funds.
In some cases, it may even be an opportunity to invest a bit more aggressively, depending on your risk tolerance and goals.
Helping Fund an Education
You can also use your RMDs to help fund an adult child’s or grandchild’s college education. With college costs on the rise, your financial support can have a meaningful impact on your family’s future.
One option is to use taxable RMD funds to contribute to a 529 college savings plan, where the money grows tax-deferred and withdrawals for qualified education expenses are tax-free. Alternatively, paying tuition directly to the educational institution is not considered a taxable gift under IRS rules, which can offer an additional tax advantage.
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
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