As we approach the end of 2021, now might be a good time to take a closer look at a few developments surrounding required minimum distributions (RMDs).
What Are RMDs?
Once you reach age 72, you are required to take minimum distributions from your traditional IRAs and most employer-sponsored retirement plans. (RMDs are not required from an employer plan if you are still working at the company sponsoring the plan and you do not own more than 5% of the company.) You can always take more than the required amount if you choose.
The portion of an RMD representing earnings and tax-deductible contributions is taxed as ordinary income, unless the RMD is a qualified distribution from a Roth account. Failing to take the full amount of an RMD could result in a penalty tax of 50% of the difference.
Generally, RMDs must be taken by December 31 each year. You can delay your first RMD until April 1 following the year in which you reach RMD age; however, you will then need to take two RMDs in one year — the first by April 1 and the second by December 31. (If you reached age 72 in the first half of 2021, different rules apply; see below.)
You may want to weigh the decision to delay your first RMD carefully. Taking two distributions in one year might bump you into a higher income tax bracket for that year.
New RMD Age and a 2020 Waiver Add Complexity
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 raised the minimum RMD age to 72 from 70½ beginning in 2020. That means if you reached age 70½ before 2020, you are currently required to take minimum distributions.
However, there was a pandemic-related rule change in 2020 that might have affected some retirement savers who reached age 70½ in 2019. To help individuals manage financial challenges brought on by the pandemic, RMDs were waived in 2020, including any postponed from 2019. In other words, some taxpayers could have benefitted from waiving both their 2019 and 2020 RMDs.
Anyone who took advantage of the 2020 waiver should note that RMDs have resumed in 2021 and need to be taken by December 31. The option to delay to April 1, 2022, applies only to first RMDs for those who have reached or will reach age 72 on or after July 1, 2021.
New Life Expectancy Tables
The IRS publishes tables in Publication 590-B that are used to help calculate RMDs. To determine the amount of a required distribution, you would divide your account balance as of December 31 of the previous year by the appropriate age-related factor in one of three available tables.
Recognizing that life expectancies have increased, the IRS has issued new tables designed to help investors stretch their retirement savings over a longer period of time. These new tables will take effect for RMDs beginning in 2022. Investors may be pleased to learn that calculations will typically result in lower annual RMD amounts and potentially lower income tax obligations as a result. The old tables still apply to 2021 distributions, even if they’re postponed until 2022.
For more information on RMDs, consider speaking with us and your tax professionals.
Have a fantastic weekend!
Golf Tip of the Week
How to Make Your Golf Swing More Athletic
Part of the reason professional athletes generate so much power and speed in their golf swing is because they figured out how to apply their own athletic skills to the golf swing. Develop a more athletic swing with help from Top 50 Fitness Instructor, Milo Bryant.
Bryant mentions the phases of throwing and how they directly relate to proper swing sequencing. The first phase he mentions is load up. While Bryant doesn’t get too in-depth, it’s clear that the movement is similar to loading up in the backswing. To complete this phase, Bryant loads all of this weight into his trail leg. As he does this Bryant remains stable and balanced, which is key in the golf swing too. The second phase Bryant talks about is open up, one of the most important phases in the sequence. Notice how Bryant’s lead hip faces the target as he opens up. This is called hip lead action, and it’s an essential part of starting the downward motion when throwing and in the golf swing.
“Think of it like a rubber band,” Bryant says. As your hips drive forward this creates separation and tension between your upper and lower body. This disassociation causes your upper body to chase your hips and lower body through impact. Bryant refers to this snapping motion as the x-factor and explains that it’s responsible for generating added power in the swing.
Practice proper hip lead action by using Bryant’s throwing technique. Load into your trail leg, pointing your lead hip at the target and then stepping out with the same foot. This should help you feel a more exaggerated hip turn and engrain the movement into your swing.
Tip adapted from golfdigest.comi
Recipe of the Week
Saltine Cracker Candy with Toasted Pecans
Makes about 2 pounds
Ingredients
- 35 Saltines
- 1 cup butter, cubed
- 1 cup packed brown sugar
- 2 cups semisweet chocolate chips
- 1 cup chopped pecans, toasted
Instructions
1. Preheat oven to 350°. Line a 15x10x1-in. baking pan with foil, grease foil. Arrange saltines in a single layer on foil.
2.In a large heavy saucepan, melt butter over medium heat. Stir in brown sugar. Bring to a boil; cook and stir 3-4 minutes or until sugar is dissolved. Spread evenly over crackers.
3.Bake 8-10 minutes or until bubbly. Immediately sprinkle with chocolate chips. Allow chips to soften for a few minutes, then spread over top. Sprinkle with pecans. Cool slightly.
4.Refrigerate, uncovered, for 1 hour or until set. Break into pieces. Store in an airtight container.
Recipe adapted from tasteofhome.comii
Health Tip of the Week
How to Reduce Christmas Stress
“It’s the most wonderful time of the year, but also a time when stress levels soar. We have put together some top tips to stop stress in its tracks and make the season of goodwill more enjoyable.
While Christmas is known as “the season to be jolly,” it can be a significant source of stress, pressure, and conflict for many of us. Some people can feel overwhelmed by the excess, expectations, and exchange and become depressed during the holidays.
A lack of time and money, credit card debt, and the pressure of gift giving can often contribute to stress during the holiday season.
Most of us are aware of the adverse effects that stress can have on our body. It can impact our thoughts, feelings, and behaviors, and it can lead to high blood pressure, heart disease, diabetes, and obesity if left unchecked.
In fact, research has shown that there is an increase in the occurrence of heart attacks and heart-related deaths during the festive season, which may be due to stress, heavy alcohol consumption, a fatty diet, or all three. Therefore, it is of utmost importance that holiday stress is dealt with — pronto.
With all the cooking, decorating, visiting, and gift giving, the holidays can seem more like trying to meet a high-pressure deadline than a vacation. So, try these Christmas stress-busting strategies to ease the strain and help stress melt away.
- Limit Spending
- Manage Expectations
- Avoid Overindulging
- Go for A Walk
- Have Some Fun
Tip adapted from mediccalnewstoday.comiii
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The articles and opinions expressed in this newsletter were gathered from a variety of sources but are reviewed by Ballentine Capital Advisors prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices.
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This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy or investment product.
No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.
Advisory services through Ballentine Capital Advisors, Inc.
i https://www.golfdigest.com/story/how-to-make-your-golf-swing-more-athletic
ii https://www.tasteofhome.com/recipes/saltine-cracker-candy-with-toasted-pecans/
iii https://www.medicalnewstoday.com/articles/320295
