Avoid Costly Mistakes With Your Retirement Withdrawals After 73
Retirees must take Required Minimum Distributions (RMDs) from certain retirement accounts after turning 73. The rules include strict deadlines and penalties, but there are also ways to manage the withdrawals wisely. Missing a payment or misunderstanding the timeline can lead to costly mistakes.
The first RMD must be taken by April 1 of the year after you turn 73. Every following withdrawal is due by December 31 each year. Those who delay their first watch until the April deadline may end up taking two RMDs in the same year—one for the previous year and one for the current—which could push them into a higher tax bracket.
Failing to withdraw the correct amount on time results in a 25% penalty on the missing sum. To avoid this, many choose to automate their withdrawals, ensuring they never miss a deadline. RMDs don’t have to be spent immediately. Some use the funds for living costs or emergencies, while others pay down high-interest debts like credit cards. Another option is reinvesting the money in a taxable brokerage account if retirement income is already sufficient. Donating the RMD directly to charity through a qualified charitable distribution (QCD) can also lower taxable income. Alternatively, the withdrawal can cover taxes when converting traditional IRA funds into a Roth IRA.
Understanding RMD rules helps retirees avoid penalties and manage their finances better. Whether used for expenses, debt repayment, or reinvestment, these withdrawals play a key role in retirement planning. Proper timing and strategy can reduce tax burdens and keep savings on track.
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