A traditional IRA is money that goes into an account pre-tax that has grown tax-deferred. An RMD, or required minimum distribution, requires that if by the age 70 1/2 a person has not been taking distributions out of their account, then they are required by the IRS to start doing so, says Joe Gleason, of Gleason Financial Group in Surprise, Arizona.
An RMD can be a challenge because people may not need the income in some cases. Gleason says they may have social security income, money from a pension or other investments, so when they're required to take the income out, it's taxable and that becomes a problem because it's income they're not using.
Gleason says that while RMD's are unavoidable as those dollars have never been taxed, it's about proper planning to make a portfolio more tax-efficient or even tax-free.
For more information about Gleason Financial, contact Joe at 623-815-9100 or visit him on the web at azfinancialplanning.com.