Slide 1

 

Slide 2
Slide 3
Slide 5
Slide 6

My Retirement Income Plan: When Should I Take Distributions?

Filed under: Retirement

Couple in convertible car smilingFor most of our lives, we focus on hard work and socking away money for retirement. We often don’t think about taking money out of our retirement accounts until we reach retirement age? But you should be aware of the basic rules and guidelines for taking distributions, so that you can plan the rest of your retirement income strategy around them.

While your situation may vary from the norm, a typical distribution scenario works like this:

The earliest age at which you can take distributions is age 59 ½. Of course, you may still be working at that age. Generally it is best to delay distributions and let your capital build interest as long as possible.

If you hold investment funds that aren’t part of a tax-deferred annuity or qualified retirement plan, it’s usually best to spend that money first. These payments usually result in a lower tax liability than if you take distributions from your 401(k) or other qualified retirement plan.

When you reach age 70 ½ , don’t forget to take required minimum distributions (RMDs) if you haven’t yet begun taking payments from your retirement account. If you don’t start taking RMDs by this age, you will be subject to a penalty. (One exception to this rule is the Roth IRA; you aren’t required to take distributions at any age)

Remember to pay attention to your tax bracket each year, and that distributions from some retirement accounts are taxed whereas others are not. During years that you expect to have a higher overall taxable income (for example, you sold your house and made a large profit), it might not be a good idea to take distributions from a taxable account like your 401(k). You might choose to withdraw from a non-taxed account, like a Roth IRA, instead.

Don’t be surprised if all of this information sounds confusing. If you need help planning your retirement fund distributions, talk to your financial advisor or tax professional. Your team is available to help you make the best decisions for your individual tax situation, so that your money will last as long as possible.
http://www.usatoday.com/story/money/personalfinance/2015/03/15/adviceiq-retirement-fund-withdrawal-strategy/70274454/