3 Ways to Get Around RMDs
Required minimum distributions are many a retiree's bugaboo. RMDs force retirees to withdraw a certain amount of money from their tax-deferred retirement savings accounts, whether they need that much money or not, often generating high income taxes for the year. Luckily, there are a few ways to minimize your RMDs -- or even get around them entirely.
Tax-deferred retirement savings accounts, such as traditional IRAs, allow you to contribute money tax-free, but they require you to pay taxes on the money you take out of the account. Without RMDs, a retiree could just leave the money in the account forever, and then their beneficiary could continue to hold the funds until their own retirement came around, resulting in enormous tax-free growth on the account's investments. But the IRS doesn't want you to get that much of a tax benefit, so starting at age 70-1/2, retirees must take distributions from their 401(k)s and traditional IRAs based on the IRS' actuarial tables.
Image source: Getty Images.
Source: Fool.com
