Advantages of Automating Your RMDs

Key Points

• By automating, you can decide in advance how often you want to make withdrawals.

• Automation helps ensure withdrawal accuracy.

• If you're looking to simplify record-keeping, automation can help.

Whether you look forward to required minimum distributions (RMDs) because the money helps cover bills or resent them because you'd rather let the money grow, they're a way of life. If you're currently retired, you might already be taking RMDs. If you're getting close to retirement, you'll either be required to take them at age 73 (or 75 if you were born in 1960 or later).

No matter how you feel about those RMDs, there are at least 10 advantages to automating them so they hit your bank account without you having to lift a finger.

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1. Convenience

Let's face it: Just because you're retired doesn't mean you're not busy. In fact, you may be busier as a retiree than you ever were when you were younger. Automating RMDs eliminates the need to mark the date on the calendar, manually calculate how much you need to withdraw, and ensure the job gets done.

Given how easy most financial institutions make it for you to automate your RMDs directly from your retirement account, you can set it and forget it.

2. You're in charge

With automated RMDs, you can customize when withdrawals are scheduled. For example, you may choose to receive distributions monthly, quarterly, or annually, depending on what you have going on in your life and cash-flow needs.

3. Timeliness

Automation allows you to stop worrying whether your RMDs will be taken on time, helping you avoid missed deadlines and dreaded penalties.

4. Accuracy

Automated systems reduce the risk of math errors in calculating the correct RMD amount, ensuring you comply with IRS regulations.

5. Tax efficiency

Once you've developed an overall tax planning strategy, an RMD can help ensure distributions are taken in a way that aligns with your plan (hopefully, helping you pay less in taxes).

6. Reinvestment

You can also pair automated RMDs with reinvestment strategies by setting up automatic transfers to other investment accounts, allowing you to potentially grow your funds while complying with RMD rules and regulations.

7. Simplified record-keeping

Automated RMDs simplify record-keeping, making it easier to track your distributions and report them accurately at tax time.

8. Help with multiple accounts

If you have multiple retirement accounts, automating your RMDs can simplify the way you track and manage RMDs across each account, ensuring you remain compliant with the specific rules of each account type and IRS rules.

9. Advisory services

Many financial advisors offer automated services as part of their overall retirement planning packages. These may include advice on managing distributions to minimize taxes and maximize remaining retirement savings.

10. Sidesteps emotional decision-making

Automating your RMDs can help you avoid making emotional decisions regarding withdrawals. Once automation is set up, you're less likely to make impulsive moves based on personal circumstances or fluctuations in the market.

If you're looking for more time to do the things you enjoy in retirement, automating your RMDs may be worth looking into. While it's not for everyone, leveraging the services of financial institutions and available technology can buy you the extra time you need.

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