Distribution Planning For Near-Retirees

We constantly hear about the importance of saving for retirement and put a lot of effort into it during our working years. Yet, the final element of any retirement strategy is often neglected: distribution planning. This tax season, as you begin collecting the information you need to file, consider how you’ll take tax-efficient distributions in retirement.

Consider the Roth*

Roth IRA accounts might be appropriate if you expect to have the same or higher income in retirement. In 2023, joint filers can contribute up to $6,500 — plus an extra $1,000 if age 50 or older and have an adjusted gross income of $218,000 or less ($138,000 or less if filing single). Make a partial contribution if your income is less than $228,000 (or $153,000, respectively).

Roth IRAs have no RMD rules during the life of the account owner, but Roth 401(k)s do through 2023.** There are no income restrictions if you have a Roth 401(k) so consider contributing the maximum the plan allows. Withdrawals for both types of Roth accounts are tax-free, subject to restrictions.

Orderly Withdrawals

1. Cash in taxable income;


2. Delay RMDs until penalties apply for not taking them;


3. Take Roth distributions.

Make sure to contact your financial and tax professionals to help ensure you have a retirement distribution strategy that meets your unique needs.

*To qualify for tax and penalty-free withdrawals of earnings, a Roth IRA or 401(k) must be in place for at least five tax-years and the distribution generally must take place after age 59-1/2, with a few exceptions.

**Starting in 2024, Roth 401(k) accounts will be exempt from RMDs during the account owner's lifetime.