Strategy 81 of 107 · new for the five-year plan
73 and over: send required distributions you don't need to principal
What it is
Required minimum distributions must come out each year from 73 whether you need them or not.
Steps
- Required minimum distributions must come out each year from 73 whether you need them or not.
- If they are not needed for living costs, send the after-tax amount to principal.
- Give part directly to charity first if you give anyway; that part is not taxed.
Repeat: Every year.
Measure: After-tax distribution (enter as a yearly amount).
Try it in the calculator Enter its amount in "Yearly amount to principal". Add a payoff goal of 5 years to see what is still needed.
Risks
- Keep enough cash for emergencies and medical costs.
Who it fits
Grandmas and grandpas (62 and over), Higher net worth, with assets
Needs
73 or older, with retirement accounts
How predictable
Most predictable: once in place, the payoff date is arithmetic
A worked example (hypothetical, not guaranteed)
Picture a hypothetical household (grandmas and grandpas (62 and over)). They owe $300,000 at 6.5% with 30 years left. The required payment is $1,896 a month, and that payment, which comes from income, never changes in this example.
They follow the steps: required minimum distributions must come out each year from 73 whether you need them or not.
Suppose it brings $6,000 once a year on principal. The loan would be paid off in 17 years 11 months instead of 30 years, saving about $173,949 in interest. To finish in five years, they would still need about $3,488 a month more from other strategies. That is why the five-year sequences stack several at once.
The amount above is chosen only to show the arithmetic. It is not an estimate of what this strategy will produce for anyone. Put real numbers from the fact finder into the calculator.
Sequences that use it
- Five-year sprint: 73 and over: Money that must come out anyway, a yearly free withdrawal, the tax saved by giving directly, and a policy no longer needed.
Sources and more information
Where to get help
Related strategies
- 80. A parent's or grandparent's large gift, using their lifetime exemption
- 82. Use an annuity's yearly free-withdrawal amount
- 83. Find lost pensions and old retirement accounts
- 78. Sell digital assets held outside retirement accounts
- 84. Claim refunds and settlements you are owed
- 77. Sell some future structured settlement payments, only with court approval