The major milestones of older Americans are not attended with the same sense of wonder that accompanies the major milestones of younger Americans. Sure, registering for Social Security benefits and signing up for Medicare are rites of passage, but they don’t hold a candle to earning your driver’s license, receiving your first kiss, winning your first promotion, or dancing at your wedding.
If you have retirement accounts when you become a septuagenarian, then you’ll encounter a milestone the Internal Revenue Service (IRS) strongly encourages you to remember. Beginning April 1 of the year following the year in which you reach age 70½, you must begin taking required minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:
401(k), 403(b), and 457(b) plan accounts
There currently are no RMDs for Roth IRAs, unless the accounts were inherited.
If you have more than one qualifying retirement account, then a separate RMD must be calculated for each account. If you want to withdraw a portion of each account, you can, but it may prove simpler to take the entire amount due from a single account. Once you start, you must take RMDs by December 31 every year. If you don’t, you’ll owe some hefty penalty taxes.
The IRS offers some instructions for calculating the RMD due. “The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’ “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.”
If you would prefer to have some help figuring out the correct amount when RMDs are due, contact your financial professional.
Today’s 65-year-olds can expect to spend about 20 years in retirement should they quit their jobs right now. However, the Social Security Administration reports that one quarter of those who are age 65 today will reach age 90, and 10 percent will make it past age 95.
Those numbers add up to a lot of time spent living off retirement savings. If you want to be comfortable during those years, finance experts say you should avoid these 10 retirement blunders.
BLUNDER NO. 1: NOT HAVING A PLAN FOR RETIREMENT MONEY.
BLUNDER NO. 2: FORGETTING ABOUT INFLATION WHEN MAKING A PLAN.
BLUNDER NO. 3: FAILING TO SAVE ENOUGH MONEY FOR RETIREMENT.
BLUNDER NO. 4: RAIDING RETIREMENT ACCOUNTS EARLY.
BLUNDER NO. 5: GETTING EMOTIONAL ABOUT INVESTMENTS.
BLUNDER NO. 6: BEING TOO CONSERVATIVE IN INVESTMENTS.
BLUNDER NO. 7: MISSING AN EMPLOYER’S 401(K) MATCH.
BLUNDER NO. 8: LETTING ALL RETIREMENT MONEY BE TAXABLE.
BLUNDER NO. 9: UNDERESTIMATING HEALTH CARE EXPENSES.
BLUNDER NO. 10: FILING FOR SOCIAL SECURITY TOO EARLY.