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A Win-Win Situation - Financial Information

     The IRS allows contributions to certain types of retirement plans to be excluded from income and to grow on a tax-deferred basis. However, starting in the calendar year after which a person turns 70.5, the IRS requires withdrawals that are taxable. These are known as Required Minimum Distributions or RMDs. The amount is included in gross income and taxed according to an individual’s tax rate. (However, due to a recent change in the law, a person who turns 70.5 in 2020 does not have to start taking the RMD until age 72.)


    These include Traditional IRAs, 401(k) plans, Roth 401(k) plans, 403(b) plans, 457(b) plans, SEPs, SARSEPs, SIMPLE IRAs and most profit-sharing plans. They do not apply to Roth IRAs while the owner is living. Except for the Roth IRA, all of these have RMDs, but not all allow the RMD to be given to a charity as described below.


    The formula for determining the amount that has to be withdrawn each year changes annually and is based on a person’s age and life expectancy. There are substantial tax penalties if a person fails to withdraw an RMD according to IRS regulations.


    However, there is a way to avoid having an RMD included in taxable income. If an RMD is given to a
qualified charity or a church, the amount is excluded from taxable income. It does not count as a contribution, but its value is much greater to an individual since it reduces taxable income dollar for dollar.


    The money must be given directly to the charity or church via a wire transfer, an ACH transfer, or a check made out to the charity or church, even though it can be sent to the individual. The tax savings can be significant, depending on a person’s tax bracket.

 
    This information is being provided by Ken Williams and Ron Buerges and has been reviewed and approved by the Finance Committee of St. Matthew UMC. It should not be construed as financial, tax or legal advice. For further information, please contact your personal advisers.


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IMPORTANT TIMES
Sunday Times
9:00 a.m. - Blended
10:15 a.m. - Sunday School
11:00 a.m. - Contemporary
6:00 p.m. - Cornerstone Deaf Church
6:30 p.m. - Bible Study

Wednesday
6:30 p.m. - Pray, Praise, and Preaching
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Address:  1200 Moreland Dr.
                  Belleville, IL 62223
Phone:  618-397-5994
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