By the time you reach 72, your qualified retirement accounts, including your 401K and your IRA, will be subject to rules and regulations governing account withdrawals. These distributions from your retirement accounts might be an essential source of funds as you progress into retirement. Is the money in these accounts enough to cover living expenses? We will help you determine how much you need based on your goals, plans, expenses, in addition to looking into other income sources and assets.
Putting too much money into these accounts can force you to receive required minimum distributions, or RMDs, that are far more than you need. Those RMDs also include a hefty tax bill. If your RMDs are larger than you need, we would advise taking only the minimum required amount, paying the necessary taxes, and then depositing the proceeds into a taxable investment account where they can continue to grow. Our team can walk you through all of the steps and details around this process. Charitably minded investors might also consider making qualified charitable distributions from their 401K account to meet donation goals and satisfy RMD requirements in a highly tax-efficient manner.
If you expect to have excess income in retirement once your RMDs kick in, you could consider a conversion of your qualified retirement accounts to Roth IRA accounts. Depending on your circumstance you could retire before the age of 72 and find yourself in a lower tax bracket, you might want to think about converting pre-tax money into post-tax money strategically by converting your 401Ks or IRAs to Roth 401Ks and Roth IRAs.
Our team of experts can strategically help you plan for your future, call the office to make an appointment for a free consultation.
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Commonwealth Financial Network® does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met.