+ Rev. Larry Strenge
Director for Evangelical Mission, SW MN Synod, ELCA
Last week a retired pastor called me seeking advice on how to give a gift to our synod. His desire was to support rural congregations, so I told him about ways that could be done through our Funding Initiative and Advent Appeal. He liked the work we are doing together. This led to a discussion about what he, like many other retired people, both lay persons and clergy, face when they reach 70 ½ years old: A new money challenge….How does one wisely invest a “Required Minimum Distribution” (RMD), the required withdrawal from accumulated retirement accounts?
In case you aren’t aware every person who reaches 70 ½ (and in each year after that) MUST make “required minimum distributions” (RMDs) from the total of ALL retirements accounts—IRAs, 401K, 403B, etc. Roth IRAs are an exception. Once a person reaches 70 ½ they MUST take out money —an RMD— from this total accumulated value of ALL these accounts every year. It can be a LARGE amount of money as the RMD percentage keeps going up as a person ages!!!
This RMD amount is based on a formula called the “RMD formula.” It starts at around 4% of the value of the accumulated value of all those retirement accounts (exception again, the ROTH IRA) on December 31 of the previous year. (Example: If your retirement accounts total $400,000 on 12/31/17 and you are 70 ½ years old you are REQUIRED to take out $14,599 in 2018! At 75 that amount is $17,468) Even if you had “other income” to live on–income from rent, a part time job, inheritance, etc–or because you simply lived on Social Security, you HAVE TO take this RMD. So does a spouse!
In this case the pastor above saw the end of the year coming. He saw that he had three choices:
- Withdraw the RMD and pay taxes;
- Give a gift to our synod and other charitable organizations and that amount would “count” toward his RMD but not be taxed; or
- Ignore taking it out and pay a 50% penalty to the IRS!
I’m glad he was a “wise person” and chose #2! And we, as well as the numerous recipients of these ministry funds, are grateful for his forethought…and his generosity!
Do you have RMDs? Act now. Remember, after December 31st an RMD of all retirement funds is still required. And as I said above in #3, you are charged a penalty of 50% of the difference between what you withdrew and your actual calculated RMD for 2018. The IRS will be the grateful ones!
Let’s see this as an act of ministry. Let’s help others in our congregation and our community know all the good that can be done by acting wisely with these RMDs! As I told this retired pastor, “We have $15,000 in matching funds in our Advent Appeal. Your gift will be doubled! And you’ll be doing this important ministry of training leaders!” He was grateful to give to this partnership in the Gospel!
So I invite you and thank you as you use those RMDs to support our synod, your congregation, or other qualified charitable organizations! We can serve God’s Mission and Vision by our actions!
Still confused or other questions? There is plenty of help available. Talk to your accountant, see a financial advisor (e.g. Thrivent agent), or simply go to the many online Q and A of an RMD. Or call me (507-627-9048). I’ll be happy to help!
Thanks for your partnership in the Gospel as you invest in God’s Mission and Vision with an RMD this year!