Do You Have to Withdraw Money From Your Retirement Account as Soon as You Retire?

If you are worrying about when to start withdrawing money from your retirement account, this is a good problem to have, because it means that you have a retirement account, and it means that there is money in it. Agonizing over when to retire is more of a fun rite of passage than it is a true dilemma. The question is not whether you will have any retirement income besides Social Security; instead, the question is how much your monthly retirement income will be and whether you can get it to peak sometime after your retirement instead of steadily decreasing after your last paycheck from your job. How much flexibility you have about when you retire and when you start taking required minimum distributions (RMDs) from your retirement account depends on your job and on what kind of retirement account you have. For help strategizing about how long the money in your retirement account will last depending on when you start withdrawing it, contact a Bronx estate planning lawyer.

Required Minimum Distributions Vary According to What Kind of Account You Have

There is no maximum amount that you can withdraw from your account; if you so choose, you can withdraw the entire balance in a lump sum the day you retire. You can even withdraw money from your retirement account before you retire, even though you must pay penalties if you do this. Different types of retirement accounts have different rules about when you must start taking required minimum distributions (RMDs), which is the minimum amount that the law requires you to withdraw each year. These are the rules about RMDs for different types of retirement accounts:

• 401(k) accounts – You must start taking RMDs the year you retire, unless you own at least five percent of the company that employs you. If you own five percent or more, there is no RMD, and you can leave the money in the account for as long as you want.
• IRA accounts, SEP IRA accounts, and SIMPLE IRA accounts – You must take your first RMD the year you turn 73, even if you retired before then.
• Roth IRA accounts, Roth 401(k) accounts, and Roth 403(b) accounts – There is no RMD, and you can leave the money in the account indefinitely.

To Save Money for Retirement and Not Spend It, Choose Roth

The greatest advantage of Roth retirement accounts is that they do not make you take RMDs. Therefore, you can theoretically live on your Social Security income until you feel like taking money out of your Roth account. It is possible, but not simple, to move your money from one kind of retirement account to another. Your best option is to make an informed choice about what kind of retirement account you want when you start your job.

Schedule a Confidential Consultation With a Bronx Estate Planning Attorney

An estate planning lawyer can help you make informed decisions about retirement accounts and RMDs.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs