We threw a lot at you in the last blog. We are revisiting one of the main topics in this column because we believe it to be among the most consequential considerations our clients – likely in situations like yours – will face in retirement.
Delaying withdrawals from your pretax accounts until required minimum distribution (RMD) age should naturally keep your tax bill low – temporarily.
The federal income tax rates that The One Big Beautiful Bill Act made permanent (indefinite is likely a better word) have provided an incredible opportunity to take voluntary – not required – distributions to help manage long term income tax exposure.
The wealth planning and forecasting work that we are doing for our clients shows several potential consequences to delaying withdrawals from pretax accounts, including:
- Less control once RMDs begin
- RMDs that are larger than what you need to fund your lifestyle
- RMDs raising income enough to increase your Medicare costs, known as Income-Related Monthly Adjustment Amount (IRMAA)
- Larger balances that your heirs will have to withdraw – and pay taxes on – within 10 years
- This change, known as the “10 Year Rule” can have an increasingly large tax drag on what your heirs will receive as account values grow. More to follow on this topic next month.
Below are some questions that we love answering for our clients. We’d love to do the same for you.
- What percent of my retirement spending is likely to be covered by retirement income?
- What income shortfall does my investment portfolio need to cover?
- Which tax buckets am I sourcing that shortfall from and why?
- How big might my RMDs get from my pretax accounts?
Josh Rebholz, CEPA®, CFP®, Associate Vice President - Financial Advisor
Patrick Tinucci, Senior Vice President - Financial Advisor