Why do we own the orchard? It’s a long-term endeavor, our favorite metaphor for retirement planning. We plant and tend the trees in our working years, but in our retirement years, we live on the fruit crop! It’s about the balances, until it’s not. Then it’s about what they produce. 🙏
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We have noticed that the rules about IRA account withdrawals can cause some confusion, particularly among those who are getting close to the “Required Minimum Distribution” age.
Here, we’d like to cover what the basics might mean for most people, though it is not intended to be advice or a recommendation for your specific situation.
For traditional or rollover IRA account owners, withdrawals after age 59½ are free of penalty, but income taxes must be paid on the amounts withdrawn. One may withdraw money or not, in accordance with their needs and plans.
But beginning at age 73, the rules change.
For each year beginning with the year you turn 73, a “Required Minimum Distribution” (RMD) must be withdrawn:
The way the numbers work, the first RMD for age 73 is around 4% of the prior year-end account balance. Then, the RMD rises gradually each year. The RMD is around 5% at age 80 and around 10% by age 92.
The withdrawals will be taxable—that is the whole object of the exercise, from the IRS’s perspective.
Even with those requirements, IRA accounts may still have significant balances until advanced ages.
Here are just a few fine points:
For more information, the IRS explains more details about RMDs online, available here. Please also keep in mind that different rules apply to inherited IRAs, Roth IRAs, and certain other situations, so do seek specific advice for your situation as necessary.
And our role? We aim to help each client figure out how your money might do what you need it to do.
So the question of how you should manage your accounts and your withdrawal strategy is best answered in a one-on-one discussion. If you would like our help talking through your situation, please call or email us. Happy to help.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
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What does it mean for our business to be “client-centered”? (Wait, shouldn’t all business be “client-centered”?…) In this week’s video, Mark and Caitie talk about the role the firm plays in our relationships with you, what the client’s job is, and more.
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Listening to one another is a gift that costs nothing but means everything. We know that our time and attention are precious resources, which is why our team here at 228 Main always has our “listening ears” on. 🙏
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Photo courtesy of AP
Clients, the hallmark of our investment strategy is ownership of companies whose outlooks are favorable, in our view. A share of stock is a piece of the action: ownership of a fraction of an enterprise.
We have owned businesses in very old lines of work, like manufacturers of farm equipment. And we’ve owned companies in new lines of work, like cloud services. We’ve been in airlines and autos, software and chipmakers, miners and medicine.
Owners have rights. We elect directors. We receive our share of dividends paid. We get annual reports—and have the right to attend shareholder meetings.
Most of us pay little attention to the trappings of corporate governance, with one exception.
Held in Omaha where its long-time leader Warren Buffett was born, Berkshire Hathaway hosts one of the largest annual shareholder meetings on the planet, with tens of thousands of people descending on the city for the festivities.
Each spring, information about Berkshire subsidiaries and the products and services they offer is shared during this corporate tradition. You can buy everything from insurance to ice cream treats. Visitors learn about companies as diverse as railroads and homebuilders.
Did we mention? Shareholders also happen to get discounts at Nebraska Furniture Mart, Borsheims, and other retailers.
For many years, Buffett himself and key leaders would entertain questions from shareholders for hours, before conducting the business of the annual shareholder meeting itself. Some say that Buffett is among the most successful investors in the history of the world: when he stepped down as CEO of Berkshire at 95 years of age, his longevity also became cemented in his legacy. He’s not alone in that in Berkshire history, either: the late Charlie Munger, long-time vice chairman, passed at age 99.
Buffett, Munger, Buffett’s descendants, and other individuals and entities have owned a vast swath of the voting control of the company over the decades.
But here’s the thing: an owner is an owner. Even a single share of stock entitles the holder to certain rights. Shareholders may inspect select corporate documents, beyond those already published and available to the public. They can nominate and send in votes to elect members to the board of directors.
And they’re allowed to participate in the annual meetings.
This spectacle of Omaha is a powerful reminder of the meaning of ownership. It’s getting a piece of the action—and being part of something bigger.
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Clients, if you have an interest in attending or taking advantage of other opportunities, you’ll need shareholder credentials. A form to order those should be included in Berkshire’s Annual Report, or you can stay tuned for more details from us in the weeks ahead.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time. Companies mentioned are for informational purposes only, and this communication should not be considered a solicitation for the purchase or sale of their securities.
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