DEAR GARDEN STATE TRUST COMPANY,
I TURNED 70 ½ THIS YEAR, SO I HAVE TO START TAKING REQUIRED MINIMUM DISTRIBUTIONS (RMDS) FROM MY IRAS. I DON’T WANT OR NEED THESE DISTRIBUTIONS, AND I’M CONCERNED THAT THEY MIGHT PUSH ME INTO A HIGHER TAX BRACKET, OR EVEN AFFECT THE TAXES ON MY SOCIAL SECURITY. IS THERE ANYTHING I CAN DO TO AVOID AN RMD?
—AFFLUEN T RETIREE
Dear “Affluen T”,
You can’t duck RMDs, but you can give them away, within limits. Those who are 70 ½ and older are permitted to transfer up to $100,000 from their IRAs to the charity of their choice each year. You can transfer less, of course—for example, you can arrange for your RMD to be paid directly to a charity instead of to you.
You don’t get a tax deduction for doing this, you get something better—the amount transferred is not included in your income at all, even though the RMD rule has been satisfied. Thus, the RMD won’t interact with your tax return in any way.
This popular tax strategy is slated to expire at the end of this year. Although it’s been renewed with regularity, it remains something of a political football.
Speak your tax advisor before making any final decisions.
Garden State Trust Company