Retirement brings on lots of financial changes. These include being subject to new IRS rules and regulations. Unfortunately, failure to understand the new requirements applicable to your situation could be a costly mistake.

While there are many tax rules retirees should know, including details about when Social Security benefits become taxable, there’s one IRS mandate that’s especially important to understand. Seniors can’t afford to break this rule because the penalties for doing so are dire.

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Retirees simply can’t afford to make this huge mistake

Every single retiree needs to know the IRS rules for required minimum distributions (RMDs). RMDs are withdrawals seniors must take out of certain tax-advantaged retirement accounts starting at age 72. Failure to take out the correct amount will lead to a huge penalty equaling 50% of the amount that should have been withdrawn but wasn’t.

The reason seniors need to know this rule should immediately become obvious when looking at this steep fee. No retiree can afford to lose thousands of dollars to the IRS that they should be utilizing to cover their essential costs. To avoid this, older Americans should follow RMD rules to the letter and begin withdrawing the requisite amount on the schedule the government requires.

Seniors are subject to RMDs if they have money in these types of accounts

Required minimum distributions aren’t mandated for every single retirement account. You only have to take them if your money is invested in one of the following kinds of tax-advantaged retirement plans:

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So if you’ve invested in a Roth IRA, you won’t need to worry about this issue. But for the rest of America’s retirees, it’s important to follow the schedule set forth for making withdrawals every single year after turning 72 so your retirement money isn’t lost.

How much do you have to take out?

The specific amount of money you must access from your investment accounts is determined based on factors including income and life expectancy. The IRS makes it easy to figure out how much you must take from your account each year by offering several crucial resources, including:

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