- 1). Add all existing IRA assets together. Determine whether or not you should convert the assets into a Roth IRA to avoid taxes later on and eliminate any RMDs.
It may be advisable to convert your IRA or start contributing to a Roth if: 1) You don't fully benefit from the annual tax deduction; 2) Your IRA value is relatively low and won't create a large tax burden to convert; or 3) You have many years to allow the assets to grow tax-free, making the conversion worthwhile. Consult a tax advisor if you have any concerns as to whether a Roth IRA is most beneficial for you.
Convert IRAs to a Roth where it makes sense. While you will add your conversion amount to your adjusted gross income in the year of conversion, your assets will grow tax-free and you will never be required to take an RMD. - 2). Elect joint life expectancy with your younger spouse. The amount of an RMD in traditional IRAs and 401k plans is based on life expectancy. The longer you are expected to live, the less you are required to take out. When electing to use your younger spouse in the calculations, you are choosing a longer life expectancy than your own, thus lowering your annual RMD requirement. It does not matter how much younger your spouse is; she can be 30 years your junior.
- 3). Elect a child as your joint life expectancy beneficiary if you are not married or are the younger spouse. The IRS only allows you to calculate the life expectancy ten years your junior when selecting a child. So even if your child is 30 years your junior, your RMD will be based on a life expectancy of someone only ten years your junior - still reducing the amount. When you die, the beneficiary will then be able to elect an RMD distribution based on his or her actual age, further stretching your IRA.
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