Jack Woods


Central Business Solutions 

301 Lynnfield Street, P.O. Box 3169 Peabody, MA 01960


Phone:  978-532-0266

Fax:      978-532-9105


1147 Main Street, Suite 213, P.O. Box 299 Tewksbury, MA 01876


Phone: 978-851-8044

Fax:     978-851-9332


Email: jack@cbps.com

November 2019

How to Take Tax-Friendly RMDs

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Before you retire, consider planning for your required minimum distributions (RMDs). This can be more complicated than you imagine if you have signicant retirement assets in qualified plans, such as 401(k) accounts and IRAs, but you can achieve a tax-friendly result with a little planning.


Generally, you must begin taking RMDs by April 1 of the year after you reach age 70 1/2 and by December 31 of each subsequent year. Your tax professional can help you determine your RMDs, which typically are calculated by dividing the balance subject to RMDs by your life expectancy.

Different rules apply if your spouse is the sole beneficiary and at least 10 years younger than you. Stiff tax penalties apply on RMD amounts not taken.


Use the years before age 70 1/2 to help ease the potential size and subsequent tax bite on eventual RMDs. For example, consider converting some traditional IRA assets to a tax-free Roth IRA during lower-income years, to limit the future income tax bite (you’ll pay ordinary income tax upon conversion).

Or invest some IRA money in a Qualified Longevity Annuity Contract (QLAC), which can delay required payments for several more years. Deducting up to 60% of your adjusted gross income annually for charitable contributions can also help reduce the tax bite.


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