New RMD rules for retirees starting in 2025

Many retirees must take Required Minimum Distributions (RMDs) from their retirement accounts when they turn 73. This means they need to withdraw a certain amount of money each year, which is taxable. However, there are smart ways to manage these funds. First, when planning how to use your RMD, consider the tax implications. If you're receiving money from your IRA, it's important to think about how to reinvest it wisely. If you need immediate income, investing in dividend-paying stocks can be beneficial. But if you prefer long-term growth, safer stocks may be a better choice since they won’t be taxed until sold. Another option is to use a Qualified Charitable Distribution (QCD). This allows you to give money directly from your IRA to a charity. This transfer counts toward your RMD and can be more tax-efficient than withdrawing the money yourself before donating it. You can also use your RMD to pay taxes on converting some of your traditional IRA into a Roth IRA. This conversion requires paying taxes on the amount you convert, but after five years, Roth withdrawals are tax-free and do not require RMDs. Waiting for a market upswing can also be a good strategy. Since the amount of RMDs is based on the previous year’s account value, waiting until the market is doing well can help you keep more money invested for future growth. Lastly, if you continue to work past age 73, you can still contribute to an IRA, even while taking RMDs. This is rare but possible, allowing you to put additional funds into retirement savings while managing your withdrawals. Just be aware that tax filings may require more effort in this case.