What is the requested minimum distribution?/Carlos Pueblo

What is the requested minimum distribution?/Carlos Pueblo

Two of my friends, as a matter of fact, a client and my brother Yancy,

mentioned to me the requested minimum distribution, RMD, during

the past few years. I thought that was still too early for me to consider

it; however, after I filed my income tax for this year and I knew that

would be right on the corner in my case, one year later. What is the

requested minimum distribution? It is the money which we have saved

throughout those year for tax shelter which the federal government like

to tax them. Like the depreciation of dwelling property, the government

like you to recapture all of it when you sell the property.

If you are familiar with the property depreciation, you will understand

how to figure out how much to take out the RMD every year and you have

better taking out more than the RMD in order to avoid the 50% penalty for

the insufficiency amount withdraw. It’s a straight line method. IRS assume

that you will live up to 98; therefore, RMD for the first year at 70 ½ years

old, you are required to take out amount which is the total value of your

pension, other than Roth account, divided by 27.5, second year is divided by

26.5 and so on every year.

Both of them found out the amount and paid the tax burden accordingly. I

like to have my own tax planning now; therefore, I move d some fund to Roth

last year and plan to do the same this year and next year before the RMD

deadline by paying more federal income tax for the last two calendar years

instead of paying for the higher tax of RMD. I assume that my income will

be higher and the federal tax rate will be higher as long as the government

keep on expanding.

I might be miscalculating the income average for my younger time that at

the senior age; however, the saving was real and the future tax could be

planned to save to the most. That is why I have been very sure to advise

pension planning to contribute to the maximum to both of my children to

build personal asset at younger age. It is still my conclusion.