Strategic Ways to Distribute Your Required Minimum Distribution

There are several ways to better preserve your account balance

By DENISE APPLEBY   Updated Jan 24, 2021

As life expectancy increases, more people want to defer making withdrawals from their retirement accounts for as long as possible to ensure that their nest eggs will meet their retirement income needs. However, withdrawals must begin by a certain age to avoid penalties.

If you are at least age 72 as of 2020, you need to withdraw required minimum distribution (RMD) amounts from your traditional, SEP, and SIMPLE individual retirement accounts (IRAs). Depending on the provisions of the plan, you may also need to withdraw from your qualified, 403(b), or 457(b) plans.1

KEY TAKEAWAYS

Some distribution strategies—such as equalizing balances for your beneficiaries and rolling over excess amounts—may help you maximize your returns and minimize your tax burden.

The new age as of 2020 for taking required minimum distributions (RMDs) from your traditional, SEP, or SIMPLE IRAs is 72.1

The $2 trillion coronavirus emergency stimulus package suspended RMDs from retirement accounts for 2020.2

RMDs Suspended Due to COVID-19

On March 27, 2020, President Trump signed a $2 trillion coronavirus emergency stimulus package called the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It suspended RMDs for people ages 72 and older for 2020, allowing retirement accounts more time to recover from the year's stock market downturn.2

In normal years, you can apply certain strategies to your retirement account withdrawals that will help you to preserve your account balance. Here we highlight some of these considerations.

Strategic Ways to Distribute From Designated IRAs

If you own multiple traditional, SEP, and SIMPLE IRAs, you must calculate the RMD amounts separately, but you can aggregate and distribute the total from one or more of those IRAs.1 When determining the IRA from which you’ll distribute your RMD for the year, you may want to consider the following strategies.

Equalizing balances for your beneficiaries

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