Retirement plans are meant to be a source of income in your retirement years. There are significant tax penalties if you take distributions prior to reaching retirement age, which the IRS normally considers to be age 59.5. Once you have attained 59.5, your distributions are taxed as ordinary income in the year the distribution occurs.
Therefore, how and when you take distributions deserves careful consideration, so you don’t send more money to the IRS than necessary.
What are your Retirement Income options? What are your retirement income needs and what are your retirement assets? Matching income needs with assets is essential to a financially successful retirement. You will need someone to be the objective arbitrator of this process and to assist you with establishing realistic goals and investment programs to support those goals.
Here are some of the factors to be considered in Retirement Income Planning:
- Do you have guaranteed lifetime income from sources other than social security? If no, do you want one? If yes, how much and what kind?
- What is your tolerance for risk and for a variable income amount?
- Are you concerned about income for a spouse or children after your death?
- What is your life expectancy? Do you have an illness that may shorten your life or do you have family genes that will give you extra years?
- Will your income needs be the same from 75 to 85 as they are from 65 to 75?
- What are your assets beyond your IRA and retirement plan assets?
- Do you have none, a little or a lot of life insurance?
- What about life insurance on your spouse?
- Have you thought about or do you have long term care insurance?
- Do you have charitable intentions either while living or at your death?
- What is your marginal tax bracket?
- When should you start social security and IRA distributions?
Remember, the IRS requires that you start taking distributions by April 15 of the year following the year in which you turn age 70.5. So, you can’t avoid taxes forever. This requirement is referred to as the MRD, Minimum Required Distribution. If you fail to take the required amount out in a given year, you pay a penalty equal to 50 percent of the required amount you failed to take.
So, don’t go it alone. Get our help. We can provide you with objective, professional advice prior for distribution and retirement income planning from your IRA or company sponsored plan. Contact us today to get started.