Rules around required minimum distributions
As a reminder, the 2019 SECURE Act and its 2022 follow up, the Secure Act 2.0, changed the RMD ages from 70½ to 73 for individuals who turn 72 on or after January 1, 2023.I am in my mid-60’s and always thought that I should wait to pull money from my retirement account. Now I hear from many of my friends that waiting can create a problem. Can you explain why I should pull money before RMDs kick in?For years, the idea was to delay withdrawing money from pre-tax accounts as long as possible.
As an example, if you are waiting to claim Social Security until age 70, you might use your 60s as a time to slowly withdraw money from your retirement accounts, thereby keeping your highest marginal bracket at 12 or 22 percent. If you wait until RMDs, the amount of the distribution plus your Social Security benefit, may push you into a higher bracket and there is no guarantee that tax rates will remain at the current historically low levels.
The good news is that unlike traditional IRA withdrawals, withdrawals of contributions from an inherited Roth are tax free, though the IRS notes: “Withdrawals of earnings may be subject to income tax if the Roth account is less than five years old at the time of the withdrawal.”
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