From Yahoo Finance: 2025-04-13 08:30:00

Retirees must understand required minimum distributions (RMDs) law, which mandates withdrawals from pre-tax retirement accounts starting at age 73. Failure to withdraw can result in a 25% tax penalty. You can reduce this to 10% if corrected within 2 years. Consider using Form 5329 to rectify errors. Plan for tax payments and asset management.

At 76 with a $460,000 401(k), you must withdraw approximately $19,409 by year-end. The purpose of RMDs is to trigger income taxes on pre-tax portfolios. You may owe at least $556 on this withdrawal. It is crucial to plan for and set aside money for tax payments.

Consider a Qualified Charitable Donation (QCD) to reduce tax liability on RMDs. While you give 100% through a QCD, you lose a percentage to income taxes. QCDs are beneficial for tax-efficient charitable giving in retirement. However, ensure it aligns with your financial goals and consult a financial advisor.

Optimize RMD withdrawals by selling underperforming assets and structuring distributions based on your financial plan. Consider the investment position and strategy of each asset before selling. Ensure your portfolio reflects your long-term investment strategy and is appropriately risk-balanced.

Consider Qualified Longevity Annuity Contracts (QLAC) to defer RMD requirements until age 85 or Roth IRA conversions to eliminate RMD obligations. QLACs satisfy RMD requirements and delay distributions, while Roth conversions move money to a tax-free account. Consult a financial advisor to explore these options.

Prepare for RMDs by understanding calculations and developing a comprehensive retirement plan. Use SmartAsset’s free tool to find a financial advisor who can help you navigate RMDs, taxes, and retirement planning. Have an emergency fund in place for unexpected expenses and compare savings accounts for optimal returns.

Read more: What’s the Best Way to Take RMDs From My $460k 401(k) at Age 76?