If you have reached age 70 ½ and are taking your required minimum withdrawals, here are some useful tips you may want to use in order to maximize your IRA account:
Tip 1: to decrease the fees you’ll have to pay when withdrawing from your IRA, you can merge traditional IRAs from multiple institutions into one. However, if you have multiple beneficiaries or different uses for each account, you may want to keep them separate.
Tip 2: keep in mind that if you have more than one IRA, you are not required to take a proportional payout from each account. You can take your entire annual payout from one account, or uneven withdrawals from each account.
Tip 3: if you have a plan with employer contributions and a plan funded only from your own contributions, it may be wise to withdraw from the personal IRA because it may have less protection from creditors.
Tip 4: a way to save on taxes is to make charitable donations as part of your required withdrawal from your IRA is retirement funds to charity. There isn’t a tax deduction, but your adjusted gross income (AGI) does not increase. Two benefits from lowering your AGI are lower Medicare premiums and lower taxes on Social Security Payments. If you are single and your AGI is above $200,000 including at least $10,000 in investment income, you are subject to a 3.8% tax when you take your required withdrawal. However, if you make the charitable donation from your IRA, the amount you donate will not be taxed, just the remainder of your payout will be taxed. Keep in mind though that charitable transfers from your IRA only work after you turn 70 ½.
(From “When the IRA Expert Reaches Her Own Withdrawal Age,” by Laura Saunders)
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