John, good to see you. We are getting back to basics today. We have RMD 101, the rules that catch retirees off guard. Required minimum distributions aren't just about taking money out. They come with specific IRS rules that affect how, when, and where those funds can be used. Understanding those basics can help you avoid penalties, manage taxes, and even support your favorite charity. All right, so let's talk through number one. Each account is separate. The IRS requires us to calculate and take the RMD from each of our pre-tax retirement accounts individually. How does this rule catch people off guard? Yeah, and there's really a couple sides to this, Erin. Number one, if you're that collector of old retirement accounts and you have 401's and 457's a- and an IRA- Mm-hmm you're gonna have to take an RMD from each one of those accounts. So if you have three 401's and an IRA, you have to take three RMD distributions from each of the three 401's, and then one from the IRA. Four distributions, four chances for mistakes, and basically each RMD is gonna be on the balance of those accounts for the prior December 31st of the prior year. Now, the exception to that is if you had multiple IRAs, one IRA can satisfy the distributions of the totalitarian, the, the total of all IRA accounts. So again, let's say you have four IRA accounts that have a million dollars at December 31st of the prior year, and your RMD for the next year is 40,000, and you have an income-generating IRA that produced $50,000, well, your RMD is satisfied. So, uh- Mm-hmm ... just understand IRAs, you can take one IRA account can satisfy that of all the other IRAs. Mm-hmm. But if you have that 401, that 401, the 401, you have to take multiple distributions. One other thing, spouses have to take their own RMDs. So you can't- Right ... take an RMD for your other spouse. It's each individual person in that household. Mm-hmm. Rule number two, you cannot use your RMDs to directly contribute to a Roth IRA, because Roth IRAs can only be funded with earned income. Yes, and an RMD is considered passive income, so- Right ... I, it's pretty short, short and simple. You have to take your RMD out. You can't do a Roth conversion with the RMD. You have to take the RMD, and that's it, and you can't actually make a Roth IRA con- contribution, uh, unless you have the earned income. Right. All right, number three, using an RMD for other expenses is okay. Once the RMD is taken, the cash is yours to use however you wish. Does that also include, John, in- reinvesting in a taxable account? Yeah, so you bring up a good point that, you know, you can use the RMD for whatever you want. It's your money. It's just essentially the forced liquidation by the government to collect that tax money. So let's use the example of you have $100,000 RMD, and you take out $100,000 from your income account from your IRA, and you've generated that money. Your RMD's satisfied Now, here's where the problem is, especially for my clients with large pensions. They don't need the money. So let's say in that example, you only need $50,000 of IRA distributions to live the life you want, but you have to take out $100,000. Well, there's the rub. You have to take out that $50,000 forced liquidation, and from that point in time, you have to realize that if it's a down market, you may exaggerate your losses, you're devaluing that account. But from there, if you want, you can put the money... You know, you can reinvest it, but it's gonna have to go into a taxable brokerage account. Mm-hmm. And then you're gonna be subject to those yearly short-term, long-term capital gains- Right ... qualified dividends and interest types of taxes. Mm-hmm. All right, number four. This one is my favorite. John, I know you're a big fan. You can use those RMDs for charitable donations. How does this work? Yes, so the biggest and bad- baddest of them all is the qualified charitable distribution, also known as the QCD. One great thing that, uh, happened is when the SECURE Act raised the RMD ages to 73 and then 75, they did not change the age of this, which is 70 and a half. So once you're beyond age 70 and a half, you can take a qualified charitable distribution from your IRA, and it's an absolute tax credit. So how this works, first of all, it has to be the first money of the year out of that specific IRA account. So you're gonna take the money out, let's say you wanna con- contribute, you know, $20,000 to a charity and/or church of your choice. You can do multiple, uh, charities, uh, at, in one sitting. You're going to have the checks written out to that church or charity of your choice, and then you are going to mail the checks to them, and you're gonna make a copy of it, 'cause it's very important that you have those records. Since the money is going directly from the IRA to the charity or church of your choice, it satisfies a qualified charitable distribution, so your RMD is satisfied, and you do not, uh, have any taxes with it. So it kills two birds with one stone. And let me- Mm-hmm ... give you a quick case study on this, Erin. We had, uh, I have a, a, a husband and wife client, very generous, very generous. They contribute or donate 40,000 plus dollars a year, but they were doing it out of their bank account or, or- Right ... you know, out of the contribution basket in church every Sunday, and they were barely just getting the, the... They exceeded the standard deduction, so they were getting some type of- Right ... deduction. However, when we worked the numbers, we said, "Hey, listen, we're gonna do this via qualified charitable distribution." We added $4,000 of tax savings just by saying, "This is where we're going to take the money from and how we're gonna do it." Yeah. The church, the charity, they still got their money, but they kept more money in the end, so everybody won. Yeah, I, I love that strategy. All right, number five. This may or may not come as a surprise to people, but RMDs, they are taxable Yes. So RMDs, they're coming from tax postponed accounts. So when you take that money out, when you have that forced liquidation, you get the tax bill. So again, using that example, let's say you have that $100,000 RMD. You've done very well. You've, you've saved. You haven't touched that before, or that IRA through retirement, and it's kept on going up, kept on going up. Well, now you have that four- $50,000 or $100,000 RMD that you need to take. You are only spending $50,000 of that. Now you have to take the extra $50,000 out. That adds- Mm-hmm ... to your taxable bottom line. So a- again, I always tell people, if you have large IRAs and you have very little in expenses in retirement, or you have a large income stream with a pension and Social Security, it's really important to look into that tax management of potentially buying out the government and doing Roth conversions. Um- Mm-hmm ... and you know, we do those high level strategies, and then we get down to the granular effects, because here's one account that is not subject to the required minimum distribution. Erin, do you know what that account is? I do. It's those favorite Roth accounts. Yes, the Roth IRA. It is not subject to the RMD, so you get to keep that money. And that, like I said- Mm-hmm ... especially down in a down market, you don't have to take that money out. So, um, again, it's always pre-planning, having that long-term horizon in- Yes ... in view of not only your investments, but your taxes. You have different tax allocation or different asset allocation, but you need to have asset location, right? Those tax funnels that we've talked about- Right ... in the past. Right Right. You know, I feel like if there's one takeaway from this conversation, John, it's this kind of is why a lot of people assume they're going to be retiring into a lower tax bracket in retirement, but those RMDs really throw people off, because they are taxable. So as you mentioned, it all comes down to proactive planning. If somebody wants to talk to you about required minimum dis- distributions and lowering their tax burden in retirement, what's the best way to reach you? Yeah. Well, visit our website, www.gosecurus.com. And while you're on our website, you brought up an interesting point, Erin, other taxes in Social Sec- or in retirement. Tax brackets, you're not always in a lower tax rate in retirement. Mm-hmm. And guess what RMDs can do? They can actually increase your taxation of Social Security for some people, and can definitely impact your IRMAA premiums on your Medicare. Right. Right. So we have videos that talk about that on our website. Now, while you're on our website, we now have a new calendar assistant that pops up right there on the bottom right-hand corner. If you have any questions, you can go ahead and schedule a 20-minute complimentary phone call, and we'll answer any general questions for you. But if you're interested in our services, you can also schedule a 60-minute complimentary vision and clarity consultation. Great. John, thank you for your time today. I appreciate it. Thank you, Erin