As a result, if you have traditional accounts, you’ll need to plan for the taxes you’ll owe as you determine the income your accounts will produce.
3. Required minimum distribution rules
Once you reach age 72, you must begin making required minimum distributions (RMDs) if you have a traditional account or a Roth 401(k). These are withdrawals from your tax-advantaged retirement account. The IRS has tables specifying the necessary amount of money to take out. Roth IRAs are exempt from RMD requirements.
If you don’t take your RMDs, the tax penalty equals 50% of the amount that should’ve been withdrawn. So it’s crucial you comply with these rules as a retiree.
By learning how Social Security and retirement benefits are taxed, you can develop a tax strategy early on in life. Then, as you approach your later years, you’ll hopefully have a realistic idea of the after-tax income available to cover the basics.
The $16,728 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.