By: Jeremy Skoglund, Trust Officer

If you are using a Traditional IRA as part of your retirement plan, you likely know what an RMD (Required Minimum Distribution) is. Once you reach age 70 ½, you are required to withdraw a portion of your IRA each year. For some, this RMD may be needed to cover regular expenses during the year. For others, though, having to take the RMD each year may cause an issue, especially if you have enough income from other sources to cover your expenses. The RMD is simply increasing your taxable income, which is increasing your taxes for that year. Don’t get me wrong, I would rather you be in a position of having higher taxable income, but one of your goals should be to reduce your taxes when you can.

If you are going to have to take an RMD this year but can cover your expenses with other funds, there is something you can do. While you can’t get around taking the RMD, there is a way to make sure that it does not increase your taxable income. What you can do is designate your RMD to a charity. The IRS has some requirements that, if followed, allow you to count the charitable donation as your RMD and the amount will be excluded from your taxable income. The main requirement is that the RMD go directly to the charity and does not come to you first, so you will want to talk to your IRA custodian before receiving your RMD. You should also discuss your options with your Tax Advisor.

And if you were planning to donate to your church, why not consider using your RMD?

If you would like to know more about IRAs, please contact our IRA Specialists: 701.857.7150