Tax Savvy IRA Distribution Ideas

October 04, 2022

As we approach the end of 2022, it’s a perfect time to begin to consider your options for retirement plan distributions.  If you are 72 or older in 2022, these options may apply to you.


One of the options you may wish to consider is the Qualified Charitable Distribution (QCD).  Under this provision, you may donate your required distribution directly to a qualifying charity.  Doing so allows you to reduce the tax liability of your distribution.  If you are not planning on utilizing your distribution for living expenses or other purposes, a QCD is a great way to contribute to causes that are important to you.  You also have flexibility to donate only a portion of your distribution if you prefer.


Secondly, 2022 has provided a great opportunity to consider converting a portion of your traditional IRA to a Roth IRA.  While doing this does create a taxable event in 2022, it may help reduce future RMD distributions.  Due to the tax liability this will create, it is wise to have enough cash to pay your tax bill when filing.  These conversions also help create a tax-free source of funds to your beneficiaries.


As always, you want to consult your tax professional prior to executing these strategies.  As advisors, we always want to present clients with options that may be useful.  In conjunction with your tax professional, we can make sure you are maximizing your opportunities to reduce your tax liabilities.


Don’t wait until December.  Reach out to your advisor before you hang your holiday decorations!

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.