What Is an RMD?

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An RMD, or required minimum distribution, refers to the amount of money that a person must withdraw from their IRA account at a certain age. Learn about RMD requirements and how they affect the federal government with help from a portfolio manager in this free video on money management and personal finances.

Part of the Video Series: Investing & Money Management
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Video Transcript

Do you have an IRA? Hi, this is Roger Groh at Groh Asset Management. If you do, and you hit seventy and a half, that year you're going to be forced by the U.S. government to begin to withdraw money from your IRA. How you can calculate that? Well, on most websites of banks or brokerage forms, they have calculators. When you plug in your age and the dollars that you have in the IRA, and then the calculator will tell you what you have to take out for that year, and then project what it might be in the future. You can change that, if you want, by putting different account balances. Meaning, if you want to know how much you have to take out in ten years, plug in what you think that the value of your account will be in ten to get an idea. Does it help or hurt to take out different amounts? Sure it does. If you think that tax rates are going to go up in the future, then taking money out before that happens might benefit you from an after tax point-of-view. Required minimum distributions, that age will probably go down, we think. In 2009 or 2010, most stats and certainly the federal government wants to increase their tax revenue, and one of the easiest ways to do it is to bring down that rate from seventy and a half to sixty-nine or sixty-eight, or some earlier age. It just means that they get a little bit more of your hard earned buck earlier. I'm Roger Groh at Groh Asset. Thank you very much for spending time with me.

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