The Pax Financial Blog

6 Factors That May Help Your Retirement Planning (San Antonio)

Financial Planning, retirement Jun 25th, 2018 by: Darryl Lyons

At age 70-½, the IRS blows out candles celebrating your half birthday … and the taxes you’ll pay from Required Minimum Distributions (RMDs) on your IRAs.

When working with a financial advisor on your retirement planning (San Antonio), these taxes should be considered. 

Although RMDs are generally unavoidable, below are 6 ideas to help navigate the inevitable RMD date:


1. Don’t double up.

You have a choice in your RMD year to delay your withdrawal until the following year. Rarely does this make sense. When you delay your withdrawal, you have twice as much to pull out of your IRA in year two. Not only does this create extra income tax, but it could also affect your Social Security and Medicare.


2. Don’t expect the bank to help. 

If your money is held at a bank or by another financial custodian, don’t expect them to make the withdrawal for you. The institution is only obligated to notify you; not execute the actual RMD.


3. Don’t forget. 

If you forget to take your RMD, you will pay a 50 percent tax penalty. Ouch! Put it on your calendar early and don’t forget to talk with your financial advisor about the upcoming change.


4. Know the calculation method. 

The IRS takes a snapshot of your IRA balance the year before you turn 70-½ and every year after that. This is the value used for the calculation. Then, in your first RMD year, divide the prior year-end balance by 27.4. This will be your first-year RMD.

Keep in mind a few key points:

  • The IRS changes this number periodically
  • The number will be different for each age
  • The number will be different under alternative beneficiary scenarios


5. Give to charity. 

You can give your RMD directly to charity. If you don’t give it directly, you will have to pay income tax on the RMD and then only possibly get a charitable income tax deduction. Charitable deductions are itemized deductions, so if you are like most Americans (68.5 percent, according to the Tax Foundation) who use the standard deduction, then you won’t even get to offset the withdrawal against a deduction. By sending the RMD check directly to your favorite non-profit, you can be assured that you will have no income tax due.


6. Convert before 70-½. 

You have a few years prior to age 70-½ to convert your traditional IRA to a Roth. If you strategize, you can reduce the amount required to come out each year.

The RMD game is relatively straightforward once you get started. It’s the initial withdrawal that requires a little planning.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. (You may want to read our 5 suggested considerations when making the conversion here.) The converted amount is generally subject to income taxation.


Talking with a financial advisor who knows your specific situation, retirement goals and spending habits can further advise you on what to do. This holistic financial planning approach may save you time, money and stress in the future. Connect with an advisor early, as the better you plan, the better your outcome will likely be.


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This material is provided by PAX Financial Group, LLC, the opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.


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