It's important to develop a thoughtful withdrawal strategy
Retirement income can come from a number of different sources, in addition to Social Security, it may include pension and retirement accounts — such as traditional or Roth 401(k) or 403(b) plan accounts and traditional and Roth IRAs.
When thinking about IRAs, you must consider RMDsFootnote 1 (required minimum distributions). Calculating RMDs can be tricky, especially if you have several retirement accounts. And you may be subject to an additional federal tax on the amount of missed or insufficient RMDs.
Click through these tips for more insights.
Different types of retirement income have their own tax treatments. Remember, every financial situation is unique, so you may wish to consult with a tax and/or legal advisor to get help.
Item 1 of 6
Use the calendar to your advantage
You generally can start taking withdrawals from an IRA or other qualified retirement plan accounts as soon as you turn 59½ without incurring a 10% additional federal tax for early withdrawals. Waiting longer could mean a larger nest egg to draw upon. Once you begin taking RMDs, you are required to take an RMD every year.
Item 2 of 6
Stick to the minimum if possible
Generally, your age and your account values determine what you are required to withdraw. You can take out more than required, but it's generally not a good idea unless you need the extra income.
Item 3 of 6
Consider all your retirement accounts
If you have multiple traditional IRAs and qualified retirement plan accounts, you must calculate your required distribution for each account. You don't have to withdraw from every traditional IRA as long as the money you take from one or more IRAs meets the overall required distribution.
Item 4 of 6
Sometimes you should keep your qualified retirement plan account intact
If you're still working for a company at 73 and own 5% or less of the company, the tax laws do not impose RMDs from that company's qualified retirement plan account until the year after you retire. In that case, you may want to roll over your funds to an IRA only after you've retired.
Item 5 of 6
Learn about our RMD Service
This service allows you to authorize Merrill to automatically calculate and distribute your annual RMD from your IRA to a Bank of America banking or Merrill investment account or an account at another financial institution.
Item 6 of 6
Don't guess — calculate each year
Don't assume your RMD withdrawal amount is set. It will vary from year to year, depending on the value of your retirement accounts and your age.