Withdrawing From A Retirement Plan In A Tax-Efficient Way

When a person is ready to start retirement there are careful decisions that they need to make about which account to draw from.  There are important tax consequences to the strategy that any person going into retirement decides to use.  This article reviews the basics about the tax implications regarding various types of accounts.  It also provides a brief explanation of how a client’s Social Security benefits can be taxed depending on their individual circumstances.  Also, it is important to think about withdrawing from the taxable accounts first.  “Investors who are 70½ or older would always need to take their required minimum distributions (RMD) from IRAs or other retirement accounts first.”  Clients should plan with their financial advisers what their anticipated income needs will be and what considerations they will need to make when deciding which accounts to withdraw from.

See Roger Wohlner, Tips for Tax-Efficient Retirement Plan Withdrawals, Investopedia, March 25, 2016.