Tax Strategy Scan: Thinking Outside the Box on RMDs

Register now

Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.

An outside-the-box idea for taking your RMD: Taking an RMD from a tax-deferred IRA when retirees reach 70-1/2 could reduce their taxable income and lower the taxable portion of their Social Security benefits, according to USA Today. Plus it also may lower Medicare premiums over time. It starts with taking a large withdrawal, much larger than the RMD. -- USA Today

Momentum investing is back, and investors should take advantage: With all four major U.S. stock index averages hitting record highs in recent weeks, momentum is back in the stock market and clients may be tempted to try momentum investing, according to MarketWatch. Advisors should point out the pitfalls, however, including capital gains taxes that can hurt portfolio performance. -- MarketWatch

Get 5% or more from preferred stocks: Clients wanting more from their investments these days may be overlooking preferred stocks, according to Kiplinger. Yields from these tax-efficient investments average 6.1 percent, well above the 2.3 percent payout of the Barclays Aggregate U.S. Bond Index and also beat the 2.1 percent dividend yield of the S&P and higher-yielding areas of the market, such as utility stocks and real estate investment trusts. But preferred stocks also pose risks because they are still bond-like in nature, which means they are sensitive to interest rate swings. -- Kiplinger

For reprint and licensing requests for this article, click here.
Financial planning Tax planning Tax tools