GOBankingRates works with many financial advertisers to showcase their products and services to our audiences.
These brands compensate us to advertise their products in ads across our site.
This compensation may impact how and where products appear on this site.
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information.
you’re able to read more about oureditorial guidelinesand our products and servicesreview methodology.
Planning ensures retirees withdraw with the intention to minimize taxes and avoid penalties.
Preparing ahead also helps preserve savings, reduce tax burdens and make the most of retirement income.
Here are threethings retirees must do before taking their first retirement account withdrawal.
Regular withdrawals offer flexibility, while RMDs are mandatory after a certain age and follow specific rules.
Create a Withdrawal Strategy
Next, youll want to verify you have a withdrawal strategy set up.
In addition, Meyer recommended overlayingretirement income guardrailsand running a stress test of the withdrawal strategy.
Guardrails dynamically adjust withdrawal amounts based on portfolio performance and spending needs, Meyer said.
They provide structure while reducing the risk of running out of money.
Run a stress test to model withdrawals undervarious market conditionsto see how long the portfolio will last.
Traditional IRAs and 401(k)s are generally taxed as ordinary income.
If the timing of the first withdrawal doesnt meet these conditions, retirees can expect to paytaxes and penalties.
If retirees aged 73 and over dont withdraw from their accounts, they could pay 25% in penalties.
Roth IRAs are exempt from RMDs during the account holders lifetime.
Meyer said retirees should start withdrawing from taxable accounts and then move to tax-deferred accounts.
Save Roth IRAs for last to allow tax-free growth, he said.
Adjust the order based on your tax bracket and income needs for the year.
Finally, Meyer suggested checking Medicare premiums andSocial Security thresholdsbefore the first retirement withdrawal.
More From GOBankingRates
Share This Article:
