Some retirees received an unexpected present from Congress just before Christmas. The age at which Required Minimum Distributions (RMDs) from qualified retirement plans must begin was lifted from 72 to 73, effective in 2023. In 2033, the age requirement jumps again, to 75. Of course, those who will turn 73 in 2023 already turned 72 in 2022, and so have already had their first RMD in most cases. 

Still, the change is welcome for those who do not need to draw from their tax-deferred retirement accounts for routine living expenses. They will get another year of growth. They should have a large pot of money to withdraw over a fewer number of years, which means still bigger RMDs.  The only downside is that the increase might push them into a higher tax bracket.

To offset that potential problem, retirees should look into the “charitable IRA rollover.” Up to $100,000 may be directly transferred from an IRA to a qualified charity. Such a transfer will not be added to taxable income, but it will count as an RMD. Some taxpayers have been simply directing their RMDs to their favorite charities each year, which simplified their finances. 

Note: This option is limited to those who are age 70½ and older (that age requirement was not changed when the RMD start age was lifted). A husband and wife may each make transfers of up to $100,000, but only if each has an IRA.

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