I have to start taking RMDs this year, and the acronyms involved are crazy: RMD, IRMAA, QCD, QLAC… (Definitions below, for the curious.)
I’ve been told that my RMD situation is complex enough that I need to get a multi-year tax plan done. Living in a small Northern Arizona town, my local options aren’t great. I’ve heard that there are excellent national firms that do this remotely. I’m looking for recommendations from others that have gone through this.
What is your experience? Are there firms that you can recommend, or warn against? How did you choose your firm? What criteria did you use? What is the most important thing you think I need to know?
Thanks,
J.
RMD: required minimum distribution. The government specifies how much you MUST withdraw from your tax-deferred accounts starting at age 73 (this year. The age regularly changes based on the whim of Congress.)
IRMAA: Income-related monthly adjustment amount. An extra surcharge on Medicare part B and D when your income passes certain thresholds.
QCD: Qualified charitable distribution. A way to reduce the taxability of your RMDs by directly donating a portion to qualified charities.
QLAC: Qualified longevity annuity contract. A way to delay having to pay taxes on some of your tax-deferred savings until you are 85.
I’m sorry this isn’t exactly the question you asked, but I would like to know anyway: is the reason your situation is complicated because you have several tax-deferred accounts? Would it simplify things to consolidate them?
I’ve never heard of QLAC, my financial adviser never mentioned it. But my RMD is still fairly small so far, and it’s been buying me a few nice extras every month. It went up maybe $300 a month this year (I’m 76). If it keeps going up at that rate, I can see how I might want to do something about it.
While I have several tax-deferred accounts, that’s not the reason it’s complicated. I was very diligent about saving for retirement. By the time I retired 10 years ago, I had a comfortable chunk of change in my tax-deferred accounts. But the stock market has been on a tear, and I now have way more in those accounts than I ever expected, and this is going to trigger high taxes, and high Medicare surcharges. I’m looking for what options are available to me to handle this situation prudently.
Thanks for the clarifications. My account went up unexpectedly last year, but then it lost most of it back again, so I guess I’m not in the same boat as you are.
Here’s yet another acronym I didn’t know about:
NIIT: Net interest income tax. A 3.8% surcharge on investment income for certain high income individuals.
J.