★ “It is not what you make, but what you get to keep that matters.” ★
Required Minimum Distribution (RMD) Optimization
Many people don’t believe that you can do a joint life on an IRA, but you can! You can do joint life with your spouse, or your kids or with your golfing buddy. For our current example, the husband picked the wife. How many years in a row, under the current assumptions, does the lifetime income annuity pay more than the RMD? Every single year. It’s an overall win: You get more during your best ten years and the income is predictable and dependable.
While most people love this concept, some will hesitate over the tax issue. We usually hear something like this: “I don’t even like getting that RMD money because I have to pay taxes and I hate paying taxes. All you’re doing is sending me more money. That just means I have to pay more taxes, and I just told you how much I hate to pay taxes!”
When you take your RMD, where do you pay your taxes from? From your RMD, and you’re left with an amount less than your RMD. But you don’t have to do that anymore. There are opportunities for you get more money so that you are still left with more after taxes than what you would with an RMD. In effect, you are using the longevity credits to pay the taxes.
We am not arguing that taxes don’t matter. It is where you can get the most amount of money after taxes that really counts. Even if it didn’t pay more, the stability and predictability of income from a lifetime income annuity makes it more desirable for a retiree.