How to Reduce Required Minimum Distributions to $105,000 in 2024

Investing in traditional-style 401(k)s and deductible traditional IRAs are the most efficient ways to do so. build A sizable retirement nest egg. Tax deductions for contributions and tax-deferred growth allow you to put more money to work and work harder during your working years.

The downside to a traditional-style qualified retirement plan arises when you retire. When you turn 73 (which will increase to 75 by 2033), you essential Withdraw money from your existing retirement plan based on your age and account balance. These required minimum distributions are generally treated and taxed as ordinary income, which can create a surprising number of tax and expense issues for retirees.

Fortunately for seniors in that situation, there are ways to reduce your RMD by $105,000 in 2024. This method is known as a qualified charitable distribution. This approach can significantly reduce the additional costs you would face by having to withdraw money from your existing retirement accounts.

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What is a Qualified Charitable Distribution?

Essentially, if you are over age 70 1/2, you can donate money directly from your IRA to a recognized charity and have it considered a qualified charitable contribution. This type of contribution directly reduces your RMD amount (dollar for dollar) up to a $105,000 limit in 2024. Additionally, up to that limit, QCD contributions are not included in your adjusted gross income for the year.

This combination can go a long way toward helping philanthropic-minded, high-net-worth seniors lower their taxes and related costs in retirement.

Why It Matters to Donors

The most obvious reason this is important to you as a donor is because by excluding the money from your adjusted gross income, you won’t be taxed on the money you donate this way. But what makes QCD so powerful for older adults are its additional benefits beyond the basic treatment.

For example, your Social Security benefits may be taxable, and whether they are taxable depends on your “combined income.” That combined income is your adjusted gross income plus tax-exempt interest income. half It is part of Social Security benefits.

These taxes start at a combined income level of as low as $25,000 for singles and $32,000 for married couples filing jointly. You may be taxed on up to 85% of your Social Security benefits if your combined income is more than $34,000 if you are single or $44,000 if you are married filing jointly. If you are married and file a separate return, you may be subject to Social Security tax regardless of your combined income.

In addition to taxes on Social Security benefits, Medicare Part B and Part D premiums are also determined by your income level. Medicare uses a transition look-back period for premium adjustments, so your 2024 premiums will be determined based on your 2022 income. This adjustment begins when your adjusted gross income is as low as $103,000 if filing single or $206,000 if filing jointly.

Adjustments start at $69.90 per month for Part B and $12.90 per month for Part D. For singles and married couples filing jointly, you can get up to $412.10 per month for Part B and $81.00 per month for Part D. If married filing separately, the maximum adjustment amount is $419.30 for Part B and $81.00 for Part D.

Get started now

When 2024 begins, it will be a whole new year of income, taxes, and related costs. If you turn age 73 or older in a given year, you also have a new obligation to take required minimum distributions from your existing retirement accounts.

The earlier in the year you plan, the easier it is to make qualified charitable distributions that can help alleviate what could lead to significant costs and tax burdens. So make today the day to make a plan to make the most of what 2024 has to offer.