Tax-Efficient Withdrawal Strategies in Retirement

Roth Conversion Considerations...

Required Minimum Distributions (RMDs) from Retirement Plans: 4 Key Questions

Tax-Efficient Retirement Income Withdrawal Ideas...

10 Biggest Retirement Mistakes: #2. Taking A 401(k) Check

If you decide to transfer your 401(k) or other retirement assets to an IRA, make sure they go directly to the new custodian.

If your employer cuts you a check, the company will be required to withhold 20% for taxes and you will have to roll the entire amount — including the 20% you didn't receive — into an IRA within 60 days.

Any money not deposited into the IRA would be treated as a taxable distribution, subject to taxes and early-withdrawal penalties.

10 Biggest Retirement Mistakes: #6. Tapping Retirement Accounts Too Soon

If you tap your retirement funds before age 59 1/2, you'll owe 
a -10% early-withdrawal penalty on top of the federal and state income taxes you'll pay on each distribution.

But if you are at least 55 when you leave your job, you can take distributions from your 401(k) without paying a penalty (although you will still owe income taxes on your withdrawals).

If you transfer your funds to an IRA, you lose the “55-and-out” option.

10 Biggest Retirement Mistakes: #7. Interrupting Early IRA Payouts

A way exists to avoid early withdrawal penalties if you tap your IRA before you are 59 ½.

You must take “substantially equal periodic payments" from your IRA based on your life expectancy for at least five years or until you are 59 1/2, whichever is longer.

But if you deviate from the payout schedule, you'll owe a 10% penalty retroactive to your first withdrawal, plus interest.


-

10 Biggest Retirement Mistakes: #9. Ignoring Minimum Distribution Rules

You are required to start withdrawing from your IRA by April 1 following the year you turn 70 1/2, and to take withdrawals by December 31 of that year and each year afterward. Miss the deadline and you’ll owe a tax penalty of 50% of the amount you failed to withdraw. You can skip the required distribution from your 401(k) is you are still working, but not your IRA.

Seniors Hold The Most IRA Assets

• 72.7% — Percentage of IRA assets held by someone 55 or older, despite the fact that only 45.7% of the population of IRA-owners are 55 or older .
  
  
• 25.4% — Percentage of retirement wealth represented by IRAs in 2008.
  
  
• 19.6% — Percentage of IRA owners between 60 and 64 who are taking withdrawals from their IRAs; the percentage of the aggregate IRA balance withdrawn for this age group is 3.8%.
  
  
• 28.6% — Percentage of 65- to 69-year-old IRA owners who are taking withdrawals; the aggregate IRA balance withdrawn is 3.9%.
  
  
• 93.0% — Percentage of IRA owners 70 and older who are taking withdrawals; the aggregate IRA balance withdrawn is 6.5%.