When you reach age 72, you’re required to withdraw money from your tax-deferred accounts, whether you want to or not.
These accounts include your IRA, your 401k, and any other tax-deferred accounts you may have.
The reason why we have RMDs (required minimum distributions) is because the government is basically saying that you got all these years of tax-deferred growth in your IRA accounts and now we want you to start taking out that money so that you have to pay tax on the withdrawals.
Thankfully, the required withdrawal amount will go down in 2022, which means that you can pay less tax at that point, too. But currently, if you have a $1,000,000 IRA, your required RMD at age 72 is around $39,000. With new RMD tables in 2022, you’re going to be expected to take out about $36,000. A difference of $3k to 4k in withdrawals means saving about $500 to $1,000 on taxes, depending on your tax bracket.
Those of you who are under age 72 still have some time to design your tax plan and withdrawal plan. Now you can start to control your taxes in retirement by planning ahead.
Here is a list of videos to help you make that plan:
- Best Age To Convert IRA to ROTH IRA
- The Three-Bucket Withdrawal Strategy
- How Much Do I Need To Retire?
Remember to always review these tips with your wealth manager or your tax advisor. If you don’t have someone you can talk to, then click here and I’ll either point you to a tax person, or have a free meeting to talk about your retirement plan.