Congress has changed several of the rules regarding qualified retirement plans like IRAs and 401(k)s. These changes, intended to increase incentives and expand options for retirement savings, are effective as of January 1, 2023.

Qualified retirement plans are designed to encourage retirement savings by allowing you to set aside some of your income each year without first paying income taxes on it. Your pre-tax dollars are held in an account and invested on a tax deferred basis. When you withdraw money from your account, usually after retirement, the deferred income taxes come due, which is why you must pay income tax on withdrawals from your qualified retirement plans.

Two new provisions provide opportunities for your charitable giving:

1) Required Minimum Distribution age increased to 73; Qualified Charitable Distribution age remains 70½

The age at which you must begin to take taxable withdrawals from your qualified retirement account has been increased to 73. 

Opportunities for you: Extending the RMD age allows more time to save for retirement, enjoy tax-free growth, and perhaps help avoid withdrawing retirement funds during a down market. The QCD is still a great way to support charity, especially if you do not itemize your income tax deductions. As an added bonus, if you are concerned about RMDs, a QCD contribution can eliminate the income tax you would have paid on your RMD.

2) Make a contribution from your IRA for a life-income gift

The new law allows donors to make a QCD contribution from their IRA accounts and receive a lifetime of payments in return. A charitable gift annuity is a simple contract from a charitable organization promising to pay you a fixed amount of money each year for life. There are some rules. You can make this election only once in your lifetime and there is a limit of $50,000. There is no income tax deduction for your contribution, although your QCD counts toward your RMD. 

Opportunities for you: his is a way to unlock some of your IRA savings without paying income taxes and turn them into a lifetime stream of income. You can even provide income for yourself and your spouse. And, if you are concerned about RMDs, this contribution will reduce the amount of income tax you would otherwise have paid.

We would be happy to provide details about these exciting opportunities. For more information, please contact Justin Gould.