Over the decades, you might contribute to a traditional IRA and 401(k).
But when should you start taking money out of these retirement accounts?
You can withdraw funds when you retire, or even before.
However, you must start taking withdrawals — called required minimum distributions, or RMDs — once you turn 73.
When you take your RMDs, you need to be aware of taxes.
RMDs are taxed as ordinary income, so they could potentially bump you into a higher tax bracket, which may increase your Medicare premiums.
To address this issue, you could convert some, or all, of your tax-deferred IRA and 401(k) to a Roth IRA, which doesn’t require RMDs.
However, this move creates taxable income in the year of conversion, so you’d need to have the money to pay the taxes.
Another possibility is donating up to $100,000 of your RMDs from a traditional IRA to a qualified charity, which would allow you to avoid the taxes that would result if you took the RMDs directly.
Before making either of these moves, consult with your tax advisor.
And learn as much as you can about RMDs - they could play a big part in your retirement income strategy.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor John Dickerson. Member SIPC.
