Category Archives: Taxes

It’s Time to Review Your RMDs: Why You Should Act Now

by Maureen Demers on

When it comes to your retirement, there’s no time like the present to review your Required Minimum Distributions (RMDs). Whether you’re already in retirement or approaching it, taking the time now to evaluate your RMD strategy could provide you with more options than if you wait until the end of the year. So, let’s break down why it’s worth reviewing your RMDs today and how this simple step can have a big impact on your financial future.

What Is an RMD, Anyway?

Just in case you’re unfamiliar, an RMD is the minimum amount you must withdraw from certain retirement accounts each year once you reach the age of 73 (for those turning 73 in 2023 or later). These withdrawals apply to tax-deferred accounts like Traditional IRAs, 401(k)s, and other similar retirement plans. The amount you’re required to withdraw is determined by your account balance and life expectancy, which means the RMD amount can change over time.

Why Review Your RMDs Now?

You might be thinking, “Isn’t it enough to just take my RMD when the time comes?” The short answer is: no. By reviewing your RMDs periodically, you have a chance to align your withdrawals with your broader financial goals. Here’s what we’ll focus on in our review together:

  1. Is Your RMD More Than You Need? Sometimes your RMD may exceed the amount you actually need for living expenses. If that’s the case, you have a few options—whether it’s using that extra income in a tax-efficient way, or perhaps donating it to charity (which may even have some tax advantages). We’ll help you explore these options to make sure your RMD isn’t causing you unnecessary tax burdens.
  2. Other Accounts with RMDs If you have multiple retirement accounts, it’s important to check whether you’re meeting the RMDs across all of them. Different accounts might have different RMD schedules, and you don’t want to miss any of them. We’ll go over all of your accounts to ensure that every RMD is being satisfied appropriately.
  3. Tax Withholding Review Your RMD is considered taxable income, so we want to make sure your tax withholding is up to date. If your withholding isn’t accurate, you could end up with a surprise tax bill at the end of the year. We’ll check that your withholding is still aligned with your current situation, helping you avoid any surprises.

The Value of Regular Reviews

Reviewing your RMDs might feel like an inconvenient task, but in reality, it’s a powerful way to take control of your financial situation. By regularly checking in on your RMD strategy, you’ll better understand your options and how they fit into the plan we’ve created for you. A little time spent on this now can help ensure your withdrawals work for you in the most tax-efficient and financially strategic way.

Tools to Help You Get Started

To make this review process smoother, I’ve put together a few helpful tools:

  • RMD Strategy Checklist: This one-page guide outlines nine key considerations when reviewing your RMDs. It’ll help you spot opportunities to optimize your strategy.
  • Your Personalized RMD Report: Contact us for a report that includes specific details about your RMD and can help answer some of the questions on the checklist.

We’re Here to Help

While the checklist and RMD report will give you a great head start, we’re always available to meet with you in person (or virtually) to discuss your finances in more detail. After all, everyone’s situation is unique, and we want to make sure your RMD strategy works best for your goals.

So, let’s get ahead of this! By reviewing your RMDs now, we can create a smarter, more efficient plan that aligns with your overall financial picture. Reach out today, and let’s make sure your retirement strategy is on the right track!

What Are Capital Gains?

by Maureen Demers on

Capital gain is the profit you make when you sell an asset. Imagine you decide to invest in the stock market. You buy some shares of a company, let’s call it ABC Inc., at $50 each. Fast forward a year. The value of those shares has gone up to $70 each! If you decide to sell those shares, you’ve made a profit of $20 per share. That profit is what we call a capital gain.

Capital gains are essentially the profits you make from selling an asset like stocks, real estate, or even art, for more than you paid for it. However, the government wants a piece of that profit. That’s where capital gains tax comes in.

The amount of tax you pay on your capital gains depends on how long you’ve held onto the asset. If you sell it within a year of buying it, it’s considered a short-term capital gain, and you’ll usually pay taxes at your regular income tax rate, which could be higher. But if you hold onto it for more than a year, it’s a long-term capital gain, and you might qualify for a lower tax rate.

Let’s go back to our ABC Inc example. If you held onto those shares for over a year before selling them, you might pay a lower tax rate on the $20 per share profit compared to if you sold them within a year.

Tax laws can vary depending on where you live and your individual financial situation. It’s always a good idea to consult with a tax professional to understand how capital gains taxes apply to you.

Overall, capital gains are a way to make money from your investments, and understanding how they work can help you make smarter financial decisions.