In discussions involving retirement, you may have come across the phrase "required minimum distributions" or "RMDs." But what are they?
Once you reach age 72, the IRS requires you to start taking money from certain types of retirement plans. You must receive these withdrawals ... whether you need the money or not.
What can I do with my distribution?
Realistically, you have two options when you receive a required minimum distribution. You can spend the money. It’s yours, of course. Or you can keep your hard-earned dollars working for you. For example, you can use your RMDs to fund:
- Life insurance.
- Mutual funds.
Confused about how much to withdraw or what to do?
Taking the correct required minimum distribution can be daunting and confusing. If you fail to take the correct distribution, you will incur a 50 percent IRS penalty on any amount of the RMD you fail to take.
One solution? Consolidate your retirement accounts with Modern Woodmen. Your Modern Woodmen representative will walk you through the steps to combine your retirement accounts. That can mean:
- Fewer financial statements to review.
- Fewer 1099 income tax forms to handle.
Plus Modern Woodmen will calculate your required minimum distribution for you each year. If the total value of your withdrawals during the tax year is less than your required minimum distribution, Modern Woodmen will automatically send the difference to you at the end of the year. With Modern Woodmen’s help, you won’t have to worry about the 50 percent IRS penalty.
Call a Modern Woodmen representative today to find out more!
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A 401(k) plan is an employer-sponsored retirement plan that offers several income tax benefits for those looking to save for retirement.