What You Need To Know About RMDs

Aside from age 72 being OG status, it’s also the age when tax laws for retirement accounts kick in and you have to take required minimum distributions. *You used to have to do this at 70 ½ but the SECURE Act of 2019 changed this rule to age 72.*

A required minimum distribution or RMD is when the IRS says “Hey, I know you love seeing this money in your account, but if you don’t mind, can you start withdrawing this minimum amount every year, it’s time to get taxed.” Think Traditional & Rollover IRAs, SEP IRAs and SIMPLE IRAs. There are more, but we’ll keep it short and sweet

*So how do I calculate my RMD* Well, take your account balance on December 31st of the previous year, divide it by the distribution period provided by the IRS tax table (hint–you can find it on Google), and bam – there’s your RMD.

You need a good strategy during your retirement years because every dollar you take out is taxable (unless you got a Roth IRA).

Remember, by contributing to tax-advantaged retirement accounts during your working years, you’re reducing your overall taxable income and how much you owe Uncle Sam.

If you have traditional retirement accounts, hopefully now that you’ve reached your retirement age, you’re not working so it’s assumed you’re in a lower tax bracket and the minimum withdrawals won’t have you paying pearl-clutching amounts in taxes.

If you’re unsure how to proceed, it’s a good time to talk to a tax professional and of course a certified financial planner.

Remember, you saved your funds during your working years, and now it’s time to use those funds to enjoy your retirement. Happy spending!

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