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2810 Fieldstream Drive North
Wilson, NC 27896
Phone: 252-237-4357
Fax: 252-243-2681
March/April 2018
Tax-Smart Distribution Strategies
If you are a tax-smart investor, you may want to look for ways to lessen the effect taxes can have on your investments. Once you retire, you’ll have a different concern: which distributions to take first in a tax-friendly manner. Consider the following.
Ground Rules
First, understand that you must begin taking required minimum distributions from a traditional IRA and most workplace retirement plans by April 1 of the year after reaching age 70. Because distributions are based on your life expectancy, your withdrawals will be higher at this age than if you chose to begin them earlier. Delaying, thus
increasing, distributions from these plans and accounts can also put you in a higher tax bracket, so talk to a tax professional to learn more.
While you must begin RMDs for many retirement vehicles, there are no such rules for a Roth IRA and a Roth 401(k) plan. You can delay withdrawals indefinitely and even leave your account to a beneficiary once you’re gone.
Next Step
If you don’t have to take Social Security payments, delay them up until age 70. Taking payments before normal retirement age will reduce your permanent benefits and can cost additional dollars if you work and earn over a certain limit.
At any point, you may want to tap your taxable investments and let investments inside tax-qualified accounts continue to grow tax-deferred (or tax-free in the case of the Roth IRA). And if you have a down year financially, consider converting a portion of your traditional IRA to a Roth IRA while your other income is low.
Plan Now
If you know you’ll retire in the next few years, plan now. The steps you take today can make retirement more comfortable, financially.
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