Alice from San Diego. "I have a Roth IRA and will be 71 in February 2019. Am I required
to take a required amount of money out every month?" Alice, with a Roth IRA, there is no
required minimum distributions. So you do not have to take any money out of that account
if you choose not to. Where, if you have a traditional IRA, or a 401(k), that is where
the required minimum distributions come into play. So Roth IRAs are exempt from RMDs. So
hopefully that made your day.
Yeah. And I'll just add, so if you have a regular traditional IRA. you just have to
take out the RMD, required minimum distribution amount, by year-end.
Or you could take it out monthly.
You could do it monthly but you don't have to.
Sure. How do you take your RMDs? (laughs)
(laughs) Wow! That's decades off. (laughs) I will say one little caveat though, Alice,
is at some point when you pass away and whoever gets the Roth IRA, if they're not your spouse,
they'll have to take a required minimum distribution on an inherited, non-spousal inherited Roth
IRA. But you don't have to take a required distribution.
All right. Maria from San Diego. "I just turned 70, and a friend told me I could start taking
RMDs..."
Now.
"...now."
I pre-read it because it was a typo. (laughs)
I was gonna read "nor." (laughs)
Thought I'd help you out. (laughs)
Thank you. (laughs) "Now or in January." As you can tell I don't pre-read these.
(laughs) Because if he were to read it it would be, "I just turned 70 and a friend told
me I could start taking RMD nor or in January." Yeah, nor sounds good to me. (laughs)
I think it's now.
Got it. "And then another one in 2020 to minimize the impact of taxes. Is this true? What is
the best time to start RMDs to lower tax impact? Thank you, Maria. What say you, Big Al? So
she just turned 70.
So we're in 2018. So I'm going to assume by just turning 70, you'll be probably 70 and
a half next year in 2019. So you don't really have to take your first RMD until 2019 - actually
2020 to be exact, that you're required beginning date would be April 1st of 2020. You agree
with me so far?
I do.
OK. However, if you wait till 2020, you're going to have to take two RMDs - one for 2019,
one for 2020. So if you're trying not to pile up too much income in one year, take one required
minimum distribution in 2019 and one in 2020, and then keep on going.
Yep. So your friend was accurate. But what is the best time to start RMDs to lower tax
impact? Well, I think if you're 70 now, Maria, you might want to look, at how much income
do you have? You might want to start bleeding some of these dollars out this year as well,
before the end of the year.
Depending on your tax bracket.
Yes. Because we have very low tax brackets right now. Let's say if you're in the 12%
tax bracket, I don't know, maybe you fill up that 12% tax bracket. So you would want
to take a distribution from that. Maybe you convert that into a Roth IRA. So you can still
stay in a very low tax bracket. That money is out of the IRA, now it's in a Roth IRA.
There is no required minimum distribution on Roth. So next year when you take your RMD
it's going to be lower because you got more money out the retirement account this year.
Right. Completely agree.
So a little bit of extra planning there for Maria.
I'll just say, yeah, that's right, Joe.
Hey, that's right, Al. You are correct, sir!