People, who are just stepping into their 70s, are nearing the legal requirement (kicks in at 72) to start taking their RMDs (Requited Minimum Distributions) from their retirement accounts. Many people don’t like these withdrawals because they are taxable.

Read on for the answers to some common questions people have about RMD and how to maximize retirement savings.

Can RMD be converted to a ROTH IRA?

No. The current tax laws don’t allow you to convert your RMD into a ROTH IRA.

However, if you do not need the money now, you can still potentially do a ROTH conversion on your remaining IRA funds, and pay some or all of the due taxes with the RMD.

Converting IRA to a ROTH IRA is taxable but you don’t have to take RMDs from a ROTH IRA. This means your money can grow tax-free, and you can also withdraw it tax-free, if you need it later.

Can the RMD be gifted?

Yes.

However, if you want to gift the money in a tax-advantaged manner, you can convert it to a ROTH IRA as mentioned in the previous answer.

Alternatively, you can gift your RMD to your children to aid funding to their own retirement accounts. Your loved ones may be in a lower tax bracket, and have a longer time to invest, which means they can potentially create even more tax-free wealth.

Can RMDs be used to fund life insurance?

Yes.

Funding life insurance with an RMD can help to build tax-free wealth or pass assets to the next generation – a cash balance that will grow and can be taken out tax-free, if handled properly.

Can RMDs fund my long-term care (LTC) insurance?

Sometimes yes.

The permanent life insurance policy, as mentioned above, can include a long-term care benefit or rider to protect the rest of your lifetime’s savings, and allow you to spend a little from your retirement assets knowing that you have coverage for LTC. The insurer will provide a highly leveraged tax-free death benefit to your heirs, in the event of your death. In case, if you need LTC care, you will get the benefits as long-term care benefits.

What about charitable donations and RMD?

If you wish to donate your RMD to charity, you should know that the QCD (Qualified Charitable Distribution) has been made permanent. If you give to charity regularly, the QCD provision lowers your tax cost.

If you are looking for a tax-free retirement plan or specialist in Los Angeles, CA, check out Tax Free Retirement Specialists or call 442-400-3522. Tax Advantaged Retirement Specialists help you reduce your taxes during retirement, and create tax-advantaged income from ROTH IRA's and Life Insurance with IRS compliant strategies. Their mission is to provide strategies and products to achieve client’s retirement goals and dreams.

Buying a house is one of the biggest financial decisions you would make in your life. In most cases, people plan a great deal before making the decision to buy a house. And it is likely that the place where you live constitutes an enormous percentage of the total net worth. Not only that, for most people, owning the home free and clear is also a source of pride, satisfaction, and great relief.

However, your mortgage may be the biggest bill you pay each month. It may be tempting to eliminate this payment to provide room in the household budget or to save for your retirement. And this may raise the question of whether you should pay off your mortgage with money out of your IRA.

The answer is not simple. Here are the most important factors to check whether using IRA money to pay off a mortgage is a sensible decision.

Age

If your age is less than 59 ½, your IRA withdrawals may be subject to an early withdrawal penalty. Conversely, if you are 65 or older and on Medicare, income increases may lead to greater Medicare B premiums in the future, due to IRMAA (Medicare Income-Related Monthly Adjustment Amount).

Potential Tax Liability

IRA withdrawals will be treated as taxable income. The bigger the withdrawal from your IRA, the higher your tax liability. In addition, the money you receive from your IRA withdrawal will be after-tax. So, if you need $50,000, you will have to make a larger total withdrawal from your IRA to your account for tax withholding. This means paying off your mortgage with an IRA withdrawal will prove much more expensive than you may have anticipated.

Retirement Income and Longevity

You must have put a great deal of planning and careful consideration into designing your retirement income strategy. If you have considered depending upon your IRA for a supplemental income during retirement, be careful. Making a large withdrawal to pay off your mortgage can cause great risk to your retirement income strategy as well as your IRA’s longevity.

If you are considering making an IRA withdrawal to pay off a mortgage, it is best to discuss your options with an income planning specialist before actually taking that step.

If you are looking for a tax efficient retirement income planning or retirement income solutions in Los Angeles, CA, check out Tax Free Retirement Specialists or call 442-400-3522. Tax Advantaged Retirement Specialists help you reduce your taxes during retirement, and create tax-advantaged income from ROTH IRA's and Life Insurance with IRS compliant strategies. Their mission is to provide strategies and products to achieve client’s retirement goals and dreams.

Investing without setting clear-cut goals is like keeping all your money buried in the yard. If you're lucky, you may be able to have enough money when you need it, but will never know for sure.

Define your goals

The foremost step in investing is defining what you want in the future. If you are in a long-term relationship, discuss your joint and individual goals as specifically as possible. For example, when you want to retire, how much would it take to send your child to college etc.

Make a list of long term, mid-term and short goals. Next, decide how much money will you need. After that you can choose the investments that can help you meet your goals.

Looking forward to retirement

Even if your retirement is a long way off, it's never too early to start planning. The sooner you begin, the more your money can grow.

For example, your goal is to retire with $500,000 in your retirement fund at age 65. You decide to begin saving $250 per month in the 401(k) and if your investment earns 6% annually, with monthly compounding, you would have more than $500,000 when you retire.

But if you wait until you're 35 to begin investing, you would need to save much more to have a similar amount, as in the first example. While it's never too late to start working toward your financial goals, starting early decisions can bring you great returns.

Some other things to consider while planning your retirement saving are:

• Plan for a long life.

• Think about your goal and how much time you have until retirement. Then choose an investment strategy. For example, if you are starting early and you can handle some risk, you may be able to put a larger percentage of your money in equity-based investments. On the other hand, if you're nearing your retirement age, you may want to invest with an income and capital preservation goal.

• Don’t forget to consider the effect of inflation on your retirement savings.

College savings

Whether you're saving for a child's education or want to go back to school yourself, paying tuition definitely requires planning. College costs are rising and understanding how to use tax advantages and investment planning can help you make the most of your savings and reducing your post-graduation debt burden.

Here are some important tips.

• Estimate how much tuition would cost.

• Find out about financial aid packages to offset some of the cost of college.

• Find out about state-sponsored tuition plans that invest your money according to your financial needs and time frame.

If you are looking for a tax free retirement specialist in San Diego or risk free retirement plan in Los Angeles, check out Tax Free Retirement Specialists or call 442-400-3522.