00:00 Brad

Well, we’re going to help you get retirement ready and talk about required minimum distributions known in the personal finance world as RMDs. And today, you ask the questions and ask finance everything. Ask Yahoo finance anything. We have a whip smart team to answer your RMD questions. And joining me now, we’ve got Yahoo finance senior columnist, Kerry Hannon. Also with us is host of Yahoo Finances Decoding Retirement video podcast, Bob Powell. Kerry, let’s start with you. Just first, from all the folks writing into you, what’s the thing that confuses them the most about RMDs?

01:10 Kerry Hannon

Yep. Uh Brad, I’d have to say, the big one is like, when do I have to take them, right? It’s it’s confusing for people about, you know, when this specific thing and as as we discussed, it’s, you know, April 1st of the year following if you turned 73, this year it’d be next April. Um, but you can take them by December 31st this year. If you turn 73 this year, you can go ahead and take it by December 31st. That’s what really trips people up. But here’s the beautiful thing is, to tell you the truth, you don’t really have to do this on your own, do that calculation. Generally speaking, your financial services company where your um IRA is or your 401k will do this calculation for you. And they will usually let you know by the end of December what you’re going to have to pay out that following year. And you can make the decision. Do I want to automate, you know, do I want to automate it? How often do I want to take money out of the accounts? And should they go ahead and withhold the taxes for you? And most people say, yeah, go right ahead and do that. There is an exception to this, um, Brad that I like people to remember that if you are still working, um, at the employer where you’re paying into that 401K plan or what have you, you don’t have to take your required minimum distributions in general until you do retire. So that’s one exception to this. But really that’s what trips people up. So again, you know, reach out to your accountant, talk to the plan administrator where your money is and they can help you work through this.

03:27 Brad

Carry, one of your readers wrote to you and asked, the stock market was up last year and so were my retirement accounts. Will my RMDs be the same or more than last year?

03:57 Kerry Hannon

Sorry, Charlie, they’re going to be more. You know, it’s the thing is, that’s the point is higher returns on your investments translate to higher RMDs because we discussed that calculation. It’s how big your account was at the end of December. So that’s what you’re going to pay for for 2025. You’re going to be based on what your uh account was worth at the end of 2024. So, you know, the S&P was up, what was it? Something like 23%. So yes, indeed, they will be a bit higher, but that is translates because you did really well last year.

04:50 Brad

Bob, turning to you. A topic that you’re interested in is a new rule regarding RMDs when someone has multiple IRAs and wants to do a roth conversion. So, what is the new rule and how do people navigate it?

05:12 Bob Powell

Yeah. Um, it’s a wonder why anyone owns an IRA, Brad, but here’s the final regulation. It states that all of your IRAs are now viewed as one giant massive IRA for RMD purposes. Now, historically, you could satisfy the RMD for a specific IRA and then convert any remaining funds in that IRA into a roth, but under the new rule, all of your aggregate RMDs from all of your IRAs must be fully satisfied before any distribution from any IRA can be converted into a roth IRA. And if you convert money from an IRA before you do all that, you could be subject to a 6% excess contribution penalty on the improperly converted amount.

06:21 Brad

Bob, got another one for you here because, you know, it’s about the 10-year rule with IRAs. People who inherit an IRA from a parent or other relative have to empty that account within 10 years of their death. But how the money is taken out during those 10 years, it differs around whether that person had started taking RMDs. So, can you please explain these scenarios and tell viewers what they need to do?

07:03 Bob Powell

Yeah, I’ll try and simplify it, Brad. So the new final regulations clarify the distribution requirements during the 10 year period. It depend on whether the original IRA owner died before or on or after what’s called their required beginning date. So, if the IRA owner died before their RBD, uh the beneficiaries have do not have to take any RMDs during years one through nine, uh following the owner’s death. They simply have to empty the entire account by the end of the 10th year. Now, if the IRA owner died on or after their RBD, the uh they have to take a what’s called an annual stretch distribution during the years one through nine, and then take out the remaining uh balance by the end of the 10th year. So it’s a little complicated uh because we’ve now added another acronym into the mix here. We’ve now, in addition to RMD, we’ve added RBD into the mix. So my advice would be it’s best to talk to a professional if you inherit an IRA.

08:43 Brad

Kerry, I got 30 seconds or less. Another one of your readers asks, can I use my RMD to make a charitable donation? What say you?

08:53 Kerry Hannon

Yes, indeed. If you are charitably inclined, absolutely. You need to make that. It’s called a qualified charitable distribution. The money needs to go directly from your IRA or your account to that non-profit, don’t come to you, go straight there. Make sure your accountant knows about, so it’s not counted as income and that money doesn’t get taxed. So, yeehaw, you make a big back, a big uh bang with your buck with that non-profit. And I think it’s a wonderful thing. You are some limits. I think it’s up to $100,000. You can do that. IRS has a few things around this, but it’s really a great option for people.

09:37 Brad

All right. AMAs ran, so AYFAs could sprint here. Ask Yahoo finance anything edition with Carrie and Bob. Thank you both so much answering some of those key burning questions from our viewers and readers. Appreciate it.

09:56 Kerry Hannon

Thanks, Brad.