A Checking Account with a Difference

BY STEVE DINNEN
A friend was showing off his new checkbook. Big deal, I thought; you’re 70-some years old and are just now settling down with a bank account?
This was no ordinary checking account, however, but one tied to his IRA account. So, rather than request a disbursement from his IRA, and wait for a check to arrive, or an electronic money transfer to take hold, he could just write a darn check immediately.
The beauty of this lay in his ability to write a check not only to himself but to any charity or nonprofit organization. As you likely know, once you reach age 70-1/2, you must take distributions from an Individual Retirement Account. That is a taxable event, because the government gave you a tax break when the money went into the account, and now it wants its taxes paid.
You can beat the IRS if you ship money from your IRA directly to a qualifying charity (including churches); that qualifies as a distribution and it’s tax free. It’s a bit clunky, however, to contact the IRA account holder and ask them to issue a payment. With an IRA checking account, you skip that procedure and write the check directly.
Good going, friend, with the new checkbook.

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