The theme this week on the One Minute Retirement Tip is What You Need To Know Before Starting IRA Withdrawals. I’m answering the most common questions I get about IRA required minimum distributions. 

Today, I'm talking about how to avoid paying taxes on your required minimum distributions. The truth is there isn't much you can do to get around paying the taxes on your required minimum distributions. As I mentioned earlier in the week, when you turn 72 you are now required to start taking out money from your IRA or 401k accounts and paying taxes on those withdrawals, since they now count as income. 

However if you are fortunate enough to not actually need the income from your IRA mandatory distributions, you can actually avoid paying the taxes on those withdrawals if you do what's called a qualified charitable distribution. 

A qualified charitable distribution is exactly what it sounds like. Instead of the money out of the IRA withdrawal going directly to you, you send the money directly to a charity. When you do this you accomplish two important things:

1.  when the money leaves your IRA and goes straight to a charity you don't have to count that money as income, because you actually didn't receive the money as income. 
2. And since you didn't receive the money as income you don't pay taxes on that income.

If you're charitably inclined,  this is an excellent way to make those charitable donations, especially since in your retirement years, taxes and income drops and if you’re not itemizing on your taxes, you can still get the tax benefits of charitable donations with a qualified charitable distribution. 

Only point of caution on the qualified charitable distributions is that they need to be done in a very specific way in order for those distributions to not be counted as income and taxable to you. So just make sure that if you're going to do it, that you handle it with care by talking to your advisor or your financial institution about how to properly handle the qualified charitable distribution.

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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