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Stewarding Your RMD for Purposeful Giving to SEED

As responsible stewards of our financial resources, we have opportunities to manage our retirement distributions wisely throughout every season of life. For those 70½ and older, understanding Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs) can help you navigate tax obligations while supporting causes you care about.
Contact your financial advisor

Which Accounts Qualify?

Accounts Subject to RMDs:

  • Traditional IRAs
  • 401(k), 403(b), 457(b) plans
  • Traditional TSP (Thrift Savings Plan)
  • SEP-IRAs and SIMPLE IRAs

Accounts NOT Subject to RMDs:

  • Roth IRAs (during owner's lifetime)
  • Roth 401(k)s (unless rolled to Roth IRA)

QCD Eligible Accounts:

  • Eligible: Traditional IRAs and Roth IRAs only
  • Not Eligible: 401(k)s, 403(b)s, or other employer plans (must first be rolled to an IRA)
Contact your financial advisor

Which Accounts Qualify?

An RMD is the minimum amount you must withdraw annually from your traditional IRA, 401(k), or other
qualified retirement accounts once you reach age 73. This ensures the government eventually collects
taxes on money that grew tax-deferred in your accounts.

RMD Age:

You must begin taking RMDs by April 1st of the year after you turn 73

Annual Deadline:

December 31st each year (except for your very first RMD)

Calculation:

Based on your account balance on December 31st of the previous year

Penalty

25% excise tax on amounts not withdrawn as required (reduced to 10% if corrected within 2 years)

Flexibility:

You can take distributions in any amount or frequency throughout the year, as long as you meet the minimum by December 31st

The Powerful Alternative: Qualified Charitable Distributions (QCDs)

A QCD allows you to direct up to $108,000 annually from your IRA directly to qualified charities. This distribution counts toward your RMD requirement but isn’t included in your taxable income. It’s a valuable tool for those who want to give generously while managing their tax burden.

QCD Eligibility Requirements

  • Age Requirement: You must be 70½ or older when the distribution occurs
  • Account Type: Only traditional IRAs and Roth IRAs qualify (not 401(k)s or other employer plans)
  • Annual Limit: Up to $108,000 per person in 2025
  • Direct Transfer: Funds must go directly from your IRA custodian to the charity
  • Qualified Charity: Must be a 501(c)(3) public charity (not private foundations or donor-advised funds)

The Process: How to Execute Your Distribution Strategy

For Regular RMDs :

January 31st:

Your custodian must provide your RMD amount calculation based on the previous year's balance

Throughout the Year

You can take distributions in any amount or frequency, as long as you meet the minimum by year-end

December 31st:

Final deadline for completing your annual RMD requirement

For Qualified Charitable Distributions

Step-by-Step QCD Process:

Contact your IRA custodian to request a QCD

Specify the exact charity name, address, and tax ID number

Request the check be made payable directly to the charity

Ensure the distribution happens after you turn 70½

Keep detailed records including the custodian's confirmation

Verify the charity received the funds

Report the QCD on your tax return (Form 1040, line 4a shows the distribution, but line 4b shows $0
as taxable)

Important:

You cannot claim a charitable deduction for QCD amounts since they’re already excluded from your taxable income. The tax benefit comes from avoiding income tax on the distribution.
Learn More

Real-Life Examples: Smart Distribution Planning

Meet Margaret (Age 70½ in 2025)

Situation

Margaret has a traditional IRA with $110,000 as of December 31, 2024, earning 4% annually. She's passionate about supporting SEED's mission. Since Margaret is only 70½, she's not yet required to take RMDs (those don't start until age 73), but she is eligible to begin making QCDs.

Margaret's Strategy:

Her account earns approximately $4,400 in interest annually (4% of $110,000). Margaret makes a $4,400 QCD entirely to SEED, using her annual interest earnings while preserving her principal for beneficiaries.

The Result:

Margaret's $4,400 QCD isn't included in her taxable income. If she's in a 22% tax bracket, she saves approximately $968 in federal taxes while maintaining her account balance for her heirs.

For Reference - What Margaret's RMD Will Be When She Turns 73:

Account Balance (maintained): $110,000
Life Expectancy Factor (age 73): 24.7 years
Estimated RMD: $110,000 ÷ 24.7 = $4,453

Meet Robert (Age 77 in 2025)

Situation

Robert has a traditional IRA with $120,000 as of December 31, 2024, earning 4% annually. He wants to support SEED while managing his tax burden and preserving wealth for his heirs

Robert's Strategy:

Robert's account earns $4,800 annually in interest, but his RMD requirement is $5,660. He directs his entire $5,660 RMD as a QCD to SEED, using his interest earnings plus $860 of principal.

The Result:

Robert's $5,660 QCD satisfies his RMD requirement and isn't included in his taxable income. He preserves most of his principal while meeting his distribution obligations and supporting SEED's mission.

Robert's RMD Calculation for 2025:

Account Balance: $120,000
Life Expectancy Factor (age 77): 21.2 years
Required Distribution: $120,000 ÷ 21.2 = $5,660
Annual Interest Earned: $4,800 (4% of $120,000)

Important Notifications and Deadlines

By January 31st each year, your IRA or 401(k) custodian must provide you with:

  • Your account balance as of December 31st of the previous year
  • Your calculated RMD amount for the current year (if applicable)
  • The deadline for taking your RMD

Smart Financial Stewardship

As thoughtful managers of our financial resources, RMDs and QCDs present opportunities to support causes we care about during retirement while potentially reducing tax burdens and preserving wealth for beneficiaries.
Contact your financial advisor

Taking Your Next Steps

If you’re interested in exploring how RMDs and QCDs might fit into your retirement and giving plan:

Review your most recent account statements to understand your current balances

Calculate your estimated RMD for the coming year (if age 73+)

Contact your IRA custodian to understand their QCD process

Consult with a tax professional to understand your specific situation

Contact Your financial advisor or retirement custodian.

For complex RMD/QCD distribution cases, please contact our enrolled agent tax partner for fee-based assistance at:

For more information about Sewing Empowerment and Economic Development (SEED) please call the number (301) 458-9805
(301) 458-9805
info@money-managers.com

Key Reminders

  • Age 70½: QCD eligibility begins
  • Age 73:RMD requirements begin
  • Direct Transfer: QCDs must go directly from custodian to charity
  • Annual Limits: $108,000 maximum QCD per person in 2025
  • Documentation: Keep detailed records of all distributions
  • Tax Reporting: QCDs appear on your tax return but aren't taxable income

Disclaimer:

This information is for educational purposes only and should not be considered personalized financial advice. Please consult with qualified tax and financial professionals before making distribution decisions.

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