It’s a whole different ballgame when you quit work to retire. Instead of a monthly paycheck coming in, you’re taking money out of savings for your living expenses. You will owe ordinary income tax on withdrawals from savings held in tax-deferred retirement accounts like 401(k)s, TSPs, 403(b)s or 457(b)s.
Starting at age 72, you are mandated by the IRS to take a RMD (Required Minimum Distribution) of a certain percentage of your tax-deferred retirement accounts each year by midnight on December 31st. Failure to take your RMD will result in a 50% penalty on the amount of the RMD in addition to taxes owed.
We recommend you have a complete retirement plan and start seriously planning around age 50-55 or so, in advance of retirement, when you can take action to potentially mitigate income taxes for the long-term. Your decision about when to file for Social Security can also have a big impact on your retirement income, and we help you optimize that. Plus, there are other strategies you can use to convert assets into a reliable income stream. Every retiree needs a custom retirement plan based on their lifestyle, goals and unique situation.