What to do with your RMD: How much will you spend?

You have to take it - but do you need it? Create tax-FREE income from your IRA, reduce RMD Take advantage of the miracle of compounding: $100,000 becomes $500,000 in 15 years. Create an investment plan for 30+ retirement years. Self-insure and self-fund all your financial needs. Social Security cuts benefits in 2034, The chickens have come home to roost The IRS requires us to take withdrawals of a certain amount from our pension, IRA, 401k, 403b or any other tax-deferred accounts starting at age 70 and a half. Uncle Sam wants the tax we deferred when we contributed to these accounts years ago. During our working lives we could avoid tax on some of our gross income or the pension we could qualify for when we retired. We can keep our 401k, 403b, etc going if we are still working. Now we have to pay up. Our RMD is an amount set each year according to IRS tables of life expectancy. We can have our trustee calculate the RMD, send it to us and then we pay tax as ordinary income. We were able to avoid tax on some of our income for years. Now we must pay the tax on that income plus the interest, gains, and dividends it earned. Uncle Sam does not care how we use our RMD retirement money but we can't put it into another tax-advantaged account if we don't need it right now. I will help you break down your alternative uses for these funds no matter how much they are. Spend it or invest it? Consider 17 alternatives.

Dan Keppel has been helping people find financial services that fit their lifestyles since working in a securities firm, an insurer, two banks and his own coach service. His book, The Insiders' Guides to Buying Discount Financial Services: Buy Direct and Save $3,000 Every Year, shows you how, what and where to buy financial products like industry insiders do--directly from the highest rated companies for less. He edits TheInsidersGuides.com and was an adjunct at a local college. He lives in Montclair, NJ with his wife and two cats, Anu and Katze.