RMDs in 2023
Some retirees received an unexpected present from Congress just before Christmas. The age at which Required Minimum Distributions (RMDs) from qualified retirement plans or IRAs must begin was changed from 72 to 73, effective in 2023. In 2033, the age requirement jumps again to 75. Of course, those who will turn 73 in 2023 already turned 72 in 2022, and have already had their first RMD in most cases.
Still, the change is welcome for those who do not need to draw from their tax-deferred retirement accounts for routine living expenses. They will get another year of growth potentially having a larger balance to withdraw over a fewer number of years, meaning bigger RMDs. The only downside is that if the RMDs are larger, they might push the account owner into a higher tax bracket.
To offset this potential problem, retirees should look into the “charitable IRA rollover”. Up to $100,000 may be directly transferred from an IRA to a qualified charity. Such a transfer will not be added to taxable income, but it will count as an RMD. Some taxpayers have been simply directing their RMDs to their favorite charities each year, which simplifies their finances.
Note: This option is limited to those who are age 70 and up (that age requirement was not changed when the RMD start age was changed). A husband and wife may each make transfers of up to $100,000, but only if each has an IRA.
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