An accounting professional with more than two decades of experience, Robert M. Ryerson serves as a Certified Financial Fiduciary at New Century Planning, located in Freehold, New Jersey. In September 2018, Robert M. Ryerson’s article, “Be Aware of the RMD Trap,” appeared on Forbes.com.
Offering a method for avoiding social security taxes during retirement, “Be Aware of the RMD Trap” addresses the rules in the IRS code related to required minimum distribution (RMD), the minimum amount an individual must withdraw from an account annually leading up to retirement. In short, the higher the RMD, the more taxes an individual must typically pay on social security. To avoid this, the article outlines a method for reducing RMD by eliminating multiple traditional 401(k) and IRA accounts.
The IRS calculates an individual’s RMD based on all of his or her 401(k) and IRA accounts. This is not the case with Roth IRAs. By converting funds to Roth IRAs, an individual can offset the tax on his or her RMDs with itemized or standard deduction(s) in retirement. However, this tax law will no longer exist in 2025, which means related tax rates may increase in the following years.
