We have recently had a couple of donors talk to us about their RMD. What’s an RMD? That’s what we wanted to know too!
“RMD” is tax talk for “required minimum distribution.” If you’ve been putting money into an IRA account over the years, and are now 70-1/2 years old, you are required to withdraw a certain amount of money out of your retirement account each year, or pay a stiff penalty.
For those in the enviable position of not needing that distribution to fund your everyday living expenses, you can have your RMD go directly to the nonprofit of your choice (hopefully RCSJ) and avoid being taxed on the distribution amount. Depending on your tax bracket, this can be a significant savings, and does not require itemizing deductions.
The most important point to avoid being taxed on the amount is to arrange that your IRA fund sends a check directly to the nonprofit, and that the money does not touch your hands.
Also, this only works with certain IRAs, not 401(k)s (although you might be able to roll your 401(k) into an IRA).
Always: Everybody’s situation is slightly different. Talk to your tax advisor to make sure you have the right kind of account before making any decisions!
Here are a couple of articles with more information: