Once you turn 70 ½, you must begin a certain number of withdrawals from your traditional IRA and your 401(k), or else face tax penalties – but what if you don’t need all the money? What should you do with the rest?
You could give some to your adult children to help them fund their own IRAs. If you don’t exceed $15,000 per individual, per year, you won’t face gift taxes.
Here’s another option: Use some of the money to help invest in a college savings vehicle for your grandchildren. Or, if they’re ready for college now, you could just write a check to the school to cover part of the tuition and other costs.
One final suggestion: You might want to transfer some of your required withdrawals directly to a charitable organization. This could help lower your taxable income, as the withdrawals are typically taxable. But you’ll need to consult with your tax advisor before making this move.
Withdrawals from your 401(k) and IRA will likely contribute greatly to your retirement income, but, as we’ve seen, they can do even more than that – so use them wisely.
If you have any questions please contact me at 980-859-2549 or by e-mail at Brandon.Monette@edwardjones.com
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.