It may seem early to discuss 2024 RMDs, but we have already been looking ahead to tax and cash management for next year, and RMDs play a critical role in that planning. A brief review of RMD basics:  

If you inherited a retirement account or are over 73 years old
and own a retirement account, you are likely subject to Required
Minimum Distributions (RMDs). An RMD is calculated each January
based on the prior December 31st account value divided by a factor
tied to your age at the end of the current year. If you want more
information on what RMDs are and how they work, check out our
post from earlier this year.

In last month’s newsletter, I discussed Qualified Charitable Distributions (QCDs) and our goal of completing them for all clients by mid-January next year. We also aim to complete all RMDs shortly after any QCDs — all by the end of January. This is why Advisors are now estimating 2024 RMDs and having conversations with clients to gather QCD information and address other key details beyond QCDs (i.e., tax withholding and where to deposit the funds).   

In the past, unless there was an immediate need for cash, we tended to defer taking RMDs until later in the year, primarily hoping for more tax-deferred income. However, this often led to deferring decisions until much too late in the year, which led to increased processing delays at custodians and increased risk of penalties (50% for any portion not withdrawn!). We also encountered difficult situations with heirs trying to access accounts and take RMDs before deadlines when an account owner died during the year before taking their RMD.   

To avoid the abovementioned issues and increase our operational efficiencies, we have been moving the RMD processing timeline up over the years. We plan to do so again in 2024 and look forward to efficiently completing this administrative task for you by the end of January. Here is a brief outline of the new process:

• December 31st – Estimate RMD and discuss key details (QCD, tax, etc.) 

• January 10th – Finalize RMD and key details (using custodian data) 

• January 15th – Raise cash in retirement account to satisfy RMD 

• January 20th – Complete QCDs (if any) 

• January 31st – Complete RMD 

We hope our new, earlier RMD timeline is a testament to our commitment to you, ensuring your retirement is handled with both efficiency and personal care. We're here to support you every step of the way.