Individuals Concerned About Impact of RMDs on Taxes

Many Americans say understanding and managing the impacts on taxes resulting from required minimum distributions (RMDs) is top of mind, according to a study by Allianz Life Insurance Company of North America.

The RMD Options Study asked high net worth consumers ages 65 to 75 about their opinions and behaviors with RMDs, and found that most consumers want to reduce the impact RMDs have on their taxes. The vast majority (95%) said it is very important to minimize their tax burden in retirement, yet nearly one-third (32%) say they have difficulty understanding how RMDs could impact their overall tax obligation. Eighty-three percent said they hate paying taxes on their RMDs that come out of most tax-deferred retirement plans, which are treated as income for tax purposes.

Many respondents worry that their RMDs may push them into a higher income tax bracket. The study found that 61% of people are concerned about this, and worry they will end up paying more taxes overall.

While 67% of consumers say they have a good plan to minimize the impact of taxes on their retirement income overall, that still leaves one-third who do not have a strategy in place. “There are many different factors to consider, so talk to your financial professional for help with your RMD strategy,” suggests Kelly LaVigne, vice president of advanced markets, Allianz Life.

The RMD Options Study was conducted in February/March 2018, and included a nationally representative sample of 805 respondents ages 65 to 75 with retirement savings of $500,000 if single or $750,000 if married and who are the primary financial decision maker or share equally in decisions.