Tax tips for taking required minimum IRA, 401(k) distributions

President Donald Trump turned 70 last June. If he, like some of his fellow Americans, has an individual retirement account, he must take the fifirst required minimum distribution from his IRA by April 1.

This year, the oldest U.S. baby boomers — born starting in mid-1946, like Trump ( June 14) — will start taking mandatory IRA and 401(k) withdrawals, also known as RMDs.

By one estimate, 2.4 mil- lion babies had been born by the end of the boom’s fifirst year.

What these boomers may not realize is the hefty tax bill that may come with taking their RMDs, which are calculated through an IRS formula — generally about 3 percent to 4 percent of the value of a retirement account.

The catch? These annual withdrawals are considered ordinary income, taxed at a rate as high as 39.6 percent, and the extra cash you take out can push you into a higher bracket.

“Those who are the biggest savers get hit the hardest because they saved the most,” said Ed Slott, who advises retirees and hosts a public-television show on saving and retirement vehicles.

Financial planners advise minimizing the tax bite in a few ways.

By law, you are required t o s t a r t t a k i n g d i s t r i b u - t i ons f ro m I RAs, 401( k) s and other kinds of tax-deferred accounts by April 1 of the year after you turn 70½. From then on, you have to take money out before Dec. 31 every year.

Withhold automatically

Instead of worrying about p a y i n g e s t i ma t e d t a xe s every quarter because of an expected RMD, you can have taxes withheld from it, just as you did with your wages.

For clients of eMoney Advisors, for example, RMDs are automatically calculated based on the end- of-the-year value and the corresponding RMD percentage, and automatically withdrawn once the account owner reaches age 70½.

T a x a c c o u n t a n t s a l s o advise arranging for automatic deductions.

“Tell your bank, broker or mutual fund you want to elect to have taxes withheld” and have the brokerage send that amount to the said Slott. You’ll receive a 1099 tax form for the amount of the income you received.

Give your RMD to charity

Tell your broker or retirement-plan administrator that you want to donate your RMD to charity directly.

Your company or brokerage may require a form or letter with the name, address and phone number of the charity and the information necessary for the broker to arrange an electronic transfer to the charity’s account, or to multiple charities.

You won’t be taxed on the RMD you’ve donated. One caveat, though: You can’t take the amount as a tax deduction, too.