It has been a little over a year since we focused attention on the critical importance to boomers of learning the ABC’s of RMD’s. With 2017 almost gone, the oldest members of the baby boom generation are reaching the age of 70 ½ which means – along with all the other adjustments that come as one enters the milestone decade of their 70’s – that it’s time for many baby boomers to change the way they think about their retirement accounts. For the first wave of boomers, RMD time has arrived.

“RMD” stands for Required Minimum Distribution, and if you don’t know the rules governing this requirement it can cost you dearly. An article that we discovered on the CNBC website last year offers a good, basic primer about RMD’s. You can click here to read the CNBC piece – it’s timely reading for older boomers.  The bottom line is that Uncle Sam wants to start collecting those income taxes you deferred all those years as you put money into your 401(k), 403(b) and traditional IRA’s. And Uncle Sam has the Internal Revenue Service to back up his claims: if you fail to take those RMD withdrawals, you’ll likely face a hefty tax penalty.

According to the IRS rules, most people holding tax-deferred retirement accounts have to start taking Required Minimum Distribution withdrawals in the year they turn 70 ½. Under the old rule of thumb the standard recommendation was to take out 4 percent per year, but that’s not how it works today. The IRS, says CNBC, has a formula based on your age and the balance in your accounts to determine how much needs to be withdrawn. That amount then becomes part of your taxable income. The CNBC article links you to some IRS worksheets and also to an online calculator that can help you figure out your RMD.

The RMD for someone age 70 is 3.65% of your balance, rising each year as you age. Here’s the kicker, says CNBC: “The stakes are high for getting RMDs right. If you don’t make the appropriate withdrawals, you may have to pay a 50 percent tax on the amount that was not taken out as required.” That’s a huge tax bite, one that is easily avoided.

The article recommends before you take any action on your own that you check with the firm holding your retirement accounts, and do this well in advance so you’ll be better prepared when RMD time comes. CNBC states that many large firms including Vanguard and T. Rowe Price will calculate RMD’s automatically for account holders and will transfer those sums to appropriate accounts to satisfy the IRS.

The CNBC piece explains how to handle multiple IRA’s or multiple retirement accounts (the rules are different for each one), and also what to do in case you have inherited an IRA or tax-deferred account. Remember, if you’re the heir to an account on which taxes were never paid, odds are you’ll be liable for those taxes. CNBC also suggests three possible strategies for avoiding RMD, including:

• Converting retirement accounts to a Roth IRA (you’ll pay taxes on the conversion amount, but Roth IRA’s are exempt from Required Minimum Distribution rules)
• Converting retirement accounts to a qualifying annuity (called a Qualifying Longevity Annuity Contract, or QLAC)
• Making a charitable deduction directly from a retirement account, called a Qualified Charitable Distribution.

Are these good strategies for you? It depends on many variables, and that is why you need expert, professional advice and counsel from someone who knows the ins and outs of retirement. Here at AgingOptions, retirement and the issues that accompany it are our specialty. We invite you to contact our office any time and come in for a review of your individual situation, and if appropriate we would be happy to refer you to one of our recommended fee-based financial planners – professionals you can trust for unbiased, expert guidance.

With all that said, as important as the RMD issue is, this article in CNBC still raises a yellow flag in our mind. We’ve read countless articles about retirement that focus entirely on money and yet miss the rest of the story! So many people seem to place all their so-called retirement planning emphasis on money, and yet there’s so much more to retirement than a financial plan. Money alone will absolutely not provide you with the kind of retirement you’ve longed for. The only retirement planning strategy that can do that is the approach we call LifePlanning.

A LifePlan is a comprehensive blueprint designed to protect your assets in retirement. Besides guarding your finances, your LifePlan will also help you make certain you’ve made the right legal preparations, considered the appropriate housing options, secured the necessary health insurance and informed your family and loved ones of your wishes. It truly is a one-of-a-kind approach to preparing properly for your future as you age. If that sounds intriguing to you, it’s easy to find out more and get your questions answered by joining Rajiv Nagaich at a free AgingOptions LifePlanning Seminar. There’s no obligation whatsoever – only the invaluable opportunity to take a fresh look at the retirement landscape with a professional guide who knows the route. We know you’ll be very glad you attended a LifePlanning Seminar, and if you wish we’ll be happy to arrange a follow-up consultation at your discretion.

To register for a LifePlanning Seminar, click here tab for dates, times, locations and online registration.  Or, if you prefer, contact us for assistance during the week. We’ll look forward to meeting you soon!

(originally reported at www.cnbc.com)