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Your Retirement Checklist: It’s Q3 – Time to Check your RMD!

Your Retirement Checklist: It’s Q3 – Time to Check your RMD!

September 12, 2023

What does RMD even mean?

RMD means Required Minimum Distribution.

It refers to the minimum amount of money that individuals who have certain types of tax-advantaged retirement accounts, such as traditional IRAs (Individual Retirement Accounts) and 401(k)s, are required to withdraw from those accounts each year once they reach a certain age. The goal of RMDs is to ensure that individuals eventually begin to withdraw and pay taxes on the funds they have saved in these retirement accounts, as these accounts offer tax advantages when contributing and growing funds.

In plain terms, Required Minimum Distribution (RMD) is the smallest amount of money that you're required to take out from your retirement savings accounts each year once you reach a certain age.

This rule is in place to make sure that you eventually use the money you saved in these accounts for retirement and start paying taxes on it. The specific amount you need to take out is based on your age and the amount of money you have saved. If you don't take out this required amount, you might have to pay extra taxes and penalties.

So, why should you check this specifically in Q3?

The term "Q3" refers to the third quarter of the year, which encompasses the months of July, August, and September. Checking on your Required Minimum Distribution (RMD) during the third quarter can be advantageous for a few reasons, as outlined below:

  1. Beat the Rush, Breathe Easy:

Picture this: the year-end is approaching, and the pressure to meet deadlines is mounting. By tackling your RMD in Q3, you're sidestepping the year-end rush. With months to spare, you can ensure that all the required paperwork, calculations, and distributions are managed smoothly. No more stress or last-minute hassle.

  1. Plan Ahead, Plan Smart:

Checking your RMD in Q3 allows you to take a step back and assess your financial landscape. How will the distribution affect your taxes? What's the impact on your financial goals for the year? By contemplating these questions in advance, you're equipped to make informed decisions that align with your overall financial strategy.

  1. Tweak and Optimize:

Discovering that your RMD is higher than anticipated can be a curveball. However, when you uncover this surprise in Q3, you have the chance to make adjustments. Perhaps you'll decide to take out extra distributions earlier in the year to lessen the tax hit. Q3 gives you the time and flexibility to optimize your financial moves.

  1. Strategic Tax Planning:

Q3 is the sweet spot for engaging in thoughtful tax planning conversations. With a clear view of your RMD and financial situation, you and your financial advisor can brainstorm strategies to maximize tax benefits. Planning ahead can lead to significant tax savings and a smoother financial journey.

  1. Advisor Availability:

Financial professionals are humans too, and they tend to get busier as the year-end approaches. Q3 offers a window of opportunity when advisors might have more availability for in-depth discussions. This means you can receive the tailored guidance you deserve without feeling rushed.

  1. Catch Errors, Make Corrections:

Nobody's perfect, and sometimes mistakes happen in calculations or account balances. By reviewing your RMD in Q3, you're giving yourself ample time to catch any discrepancies or errors. Rectifying these issues ahead of time ensures a smooth RMD process and avoids potential penalties.

In the world of retirement planning, the Required Minimum Distribution (RMD) is a key player. By tackling this task in the third quarter of the year (Q3), you're setting yourself up for success. You're avoiding the frenzy, making thoughtful decisions, and optimizing your financial moves. So, as you navigate the path to a secure retirement, remember that checking your RMD in Q3 is more than just a to-do—it's a strategic move that can shape your financial future.

*This information may not be relied on for the purpose of determining your social security benefits or eligibility, or avoiding any federal tax penalties. You are encouraged to seek advice from your own tax or legal professional.