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You are here: Home / Roth IRA / 3 Potential Retirement Surprises You’ll Want to Get Ahead Of | Personal Finance

3 Potential Retirement Surprises You’ll Want to Get Ahead Of | Personal Finance

July 4, 2021 by Retirement

All retirement accounts except Roth IRAs have RMDs. Interestingly, Roth 401(k)s, though they are taxed in the same way as Roth IRAs, do have RMDs. But you can get around that requirement by rolling your Roth 401(k) funds over into a Roth IRA before you turn 72.

For most people, RMDs won’t be much of a problem. You’ll probably need to withdraw more from your retirement accounts than you would be compelled to in any given year anyway. But those who hope to keep their savings in their retirement accounts for as long as possible may have to withdraw more than they’d initially planned.

You don’t want to skip RMDs — doing so will cost you a 50% penalty on the amount you should have withdrawn. That’s certain to be more than the taxes you would have paid if you did what you’re supposed to do.

Familiarize yourself with how RMDs work and, if you’re approaching the age where you’ll have to begin taking them, estimate how much you’ll have to withdraw. If it’s going to increase your tax bill, make sure you budget for this extra expense.

You won’t be able to avoid these expenses in retirement, but planning for them well in advance can prevent a lot of unpleasantness. If you haven’t yet, go back through your retirement plan right now and adjust it accordingly. That may mean you need to increase your retirement contributions. But years from now, when the bills start rolling in, you’ll be glad you did.

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