What is the best strategy for taking rmd?

Decide the best time to take an RMD. You can take the RMD at any time of the year. Some people schedule monthly distributions that are at least equal to the RMD, because they like regular cash flow. Others take their RMDs at the beginning of the year to make sure the homework is done.

And others wait until the end of the year. They want to maximize profits and income with deferred taxes and they want to delay the payment of estimated taxes on distributions. For some retirees, this is not mandatory; they need the money to live. But managing an amount of cash is hard to do.

A better way is to take the money at regular intervals to simulate a paycheck. We set up a distribution once a month and sometimes twice a month, Hook says. Psychologically, people do better with that because that's what they're used to. An IRA depositary can help you do this.

Once you turn 59 and a half years old, you can start withdrawing money from retirement accounts without a tax penalty. Making larger distributions in the first few years of your retirement can reduce your total account balance and lower your RMDs later on. This option might make sense if you expect to be in a lower tax bracket when you retire. Withdrawing your retirement accounts before age 72 may offer another benefit.

You may be able to delay receiving Social Security benefits. The longer you delay benefits beyond your full retirement age, the more your benefits will increase. If you can wait until age 70, for example, you'll receive 132% of your benefit amount. Roth IRAs offer the advantage of withdrawing money 100% tax-free and have no RMD.

If you want to completely avoid mandatory distributions, you can convert your traditional retirement funds into a Roth account. You'll have to pay taxes on the conversion in the year it occurs. However, it might be worth passing a one-time tax bill to avoid RMDs and allow you to withdraw remaining retirement funds tax-free. If you have some of your retirement funds in your current employer's 401 (k) plan, you might consider working longer to avoid RMDs.

As long as you continue to work in any way, you are not required to accept the minimum distributions of a work plan in which you are still employed. If you're married and there's a significant age difference between you and your spouse, you may have another option to lower the RMD. If you are 10 years or older than your spouse and name you as the sole beneficiary of your retirement account, you can use the IRS's joint life expectancy and last survivor table to calculate RMDs.