Broker Check
Understanding Retirement Account Distribution

Understanding Retirement Account Distribution

April 27, 2023

Planning your retirement income distribution requires a multi-step strategy and budget for all of your income and spending expectations in retirement. For the most accurate plan that best reflects your financial circumstances, start with planning essential expenses, like housing, transportation, utilities, food, clothing, and healthcare. Then identify nonessential expenses that reflect the lifestyle you want to have in retirement. Be sure your budget considers that your income will likely come from a variety of sources.

Here are 4 tips to keep in mind for basic account distribution planning:

  1. Use predictable income, such as Social Security, or cash to cover essential expenses.
  2. Rebalance your portfolio to generate cash flow.
  3. Sell investments in tax-deferred or tax-free accounts.
  4. Remember you may receive income from multiple sources, and they could either be regular or potential income sources.
    a. Regular sources will have a set schedule for the rest of your life, i.e., Social Security.
    b. Potential sources will come from savings and investments, e.g., 401(k)s and Roth IRAs.

What are Required Minimum Distributions?

Required Minimum Distributions (RMDs) are the minimum amount you must withdraw from your retirement accounts each year after you turn 73. The required amount will differ depending on your life expectancy and marital status, as well as your spouse’s age (if applicable).

What types of retirement plans require minimum distributions?

Traditional; rollover; SIMPLE, SARSEP and SEP IRAs and most 401(k), 403(b) and 457(b) plans will have RMDs. Roth IRAs will not require RMDs unless they are inherited. Workplace accounts will not require RMDs until you retire.

What happens if a person does not take a RMD by the required deadline?

If you do not take out your required amount by the deadline, you will incur a penalty of 50% of what you were supposed to take out.

Remembering all this information and balancing the multiple distributions of income that come with retirement can be a lot. The plan we have set up takes these factors into account but if you have any questions, you can call the office.

This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera nor any of its representatives may give legal or tax advice.