Whether your clients are ready for retirement income or not, IRS rules require that they start drawing down their savings from certain types of accounts at a certain age — currently the year after they turn 70 1/2 or 72 years old, depending on when they were born. You can use this guide to help your clients solve the required minimum distribution (RMD) puzzle.
We’ll cover key questions about RMDs, such as:
More about required minimum distributions
In essence, the tax deferrals that most IRAs, retirement and profit sharing plans are afforded don’t last forever1. Of course, navigating IRS rules is never easy. It can be a real puzzle. Known as required minimum distributions (RMDs), the minimum, annual payments will vary in size from person-to-person based on a number of factors2 including your client’s age and account balances in impacted accounts.
To keep it simple, currently any year they end with an account balance in one or more of these accounts after they reach RMD age, they’ll be required to take a minimum distribution the following year. That income could be taken from:
If they are drawing retirement income anyway, it may not be a big deal, but they may not see these obligations as a positive.
They might still be working, and the additional income could lead to an unplanned tax obligation1 when marginal tax rates would make it more expensive. They may not need the income, even in retirement.
Whatever the case, working with you – their financial professional – and a qualified tax adviser, they can find options to help minimize the impact of RMDs or make the most of them.
Required minimum distributions create a recurring opportunity for client contact courtesy of the tax code, and with enough notice, you could recommend an accumulation- or legacy-focused product that also can check the RMD box. Take a look through the RMD puzzle brochure to learn how you could potentially find new assets, getting your clients into a Midland National product.
Required minimum distributions (RMDs) create a recurring opportunity for client contact courtesy of the tax code, and with enough notice, you could discuss an accumulation- or legacy-focused product that also can check the RMD box. This fact-finder can be paired with the ABCs of RMDs brochure to help your clients determine their RMD needs and options.
1. Neither Midland National, nor any agents acting on its behalf, should be viewed as providing legal, tax or investment advice. Required distributions are taxable. Talk to your tax adviser about how this impacts your situation.
2. See IRS.gov for the tables, worksheets and resources to calculate the amount of your required minimum distributions in any given year.
The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.
Neither Midland National® Life Insurance Company, nor any financial professionals acting on its behalf, should be viewed as providing legal, tax or investment advice. Please rely on your own qualified tax professional.
Insurance products issued by Midland National® Life Insurance Company, West Des Moines, Iowa. Product and features/options may not be available in all states or appropriate for all clients. See product materials for further details, specific features/options, and limitations by product and state.
Fixed index annuities are not a direct investment in the stock market. They are long term insurance products with guarantees backed by the issuing company. They provide the potential for interest to be credited based in part on the performance of specific indices, without the risk of loss of premium due to market downturns or fluctuation. Although fixed index annuities guarantee no loss of premium due to market downturns, deductions from your accumulation value for additional optional benefit riders or strategy fees associated with allocations to enhanced crediting methods could exceed interest credited to the accumulation value, which would result in loss of premium. They may not be appropriate for all clients. Interest credits to a fixed index annuity will not mirror the actual performance of the relevant index.
33671Y | PRT 7-6-21