Beginning at age 73, you must begin to withdraw money from your retirement accounts every year. The amount is determined based on your life expectancy as contained in the IRS tables. Required minimum distributions are computed by dividing the account balance at year-end by the life expectancy factor.
Roth IRAs are funded with money that you’ve already paid tax on, and then they grow tax-free. This is different than traditional pre-tax funded retirement accounts. Roth IRAs offer many advantages that other traditional retirement accounts don’t.
With a traditional IRA, you may qualify for a tax deduction when you invest your money. But later, when you take the money out in retirement, all those distributions are taxed. The Roth IRA is the opposite. It has no deduction when you put the money in, but later, all distributions are tax-free when you take the money out during retirement.
Tax efficient investing involves strategies to help reduce the impact of taxes. Investments have three tax flavors: taxable, tax-deferred and tax-exempt.
Too many retirees believe that they don’t have to do any planning in retirement. They spent years saving for their retirement and now they think they can coast. WRONG!