Understanding RMDs: A Guide for Retirees & Pre-Retirees

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Show Notes

In today’s episode, we delve into a critical aspect of retirement planning that can significantly impact your financial future – Required Minimum Distributions (RMDs). Whether you’ve stashed your savings in a 401(k), 403(b), 457, IRA, SEP IRA, or simple IRA, understanding RMDs is crucial, especially if you’re approaching your seventies.

 

Join us as we discuss the “why” and “how much” of RMDs, ensuring you’re well-prepared for this financial milestone. If you’re not yet retired, we’ve got you covered too! In the latter part of the episode, we’ll share valuable steps and strategies to help you proactively reduce the long-term effects of RMDs on your financial well-being.

 

Key discussion points in this episode:

  • If you have savings in tax-deferred accounts such as 401(k), 403(b), 457, IRA, SEP IRA, or simple IRA, you are required to take RMDs once you reach your seventies
  • RMDs exist because when you contributed to tax-deferred accounts, you received tax deductions. The IRS wants to collect the taxes you deferred, so they require you to start withdrawing from these accounts in your retirement years
  • The age at which you must start taking RMDs depends on your date of birth
  • RMDs are calculated based on your account balances and life expectancy tables published by the IRS. The amount you need to withdraw increases as you get older
  • There are strategies to reduce the impact of RMDs, such as switching contributions to Roth accounts, performing Roth conversions, and managing asset allocation

 

Thanks for checking out this episode of the podcast. If you’d like to learn more about financial and retirement planning, check out our YouTube channel here.