3. See how retirement income can interact
Lesson 3 of 5 · Retirement Assets and the Tax Time Bomb
3. See how retirement income can interact
Required minimum distributions (RMDs) eventually require withdrawals from many pretax accounts. Timing depends on birth year and account type; employer-plan exceptions may apply. Roth IRAs do not require lifetime RMDs from their owners. Identify the rules for your own accounts rather than assuming one starting age fits everyone.
Taxable withdrawals can interact with other income. Depending on the calculation, up to 85% of Social Security benefits may become taxable. That does not mean an 85% tax rate. Higher modified adjusted gross income can also raise Medicare premiums through IRMAA, generally using income from two years earlier.
A surviving spouse may face a different filing status, and beneficiaries may have their own distribution obligations. A projection should consider these possibilities alongside your spending needs.
Your exercise: Put anticipated retirement, Social Security, pensions, Medicare, and first RMD years on one timeline. Note which years may have comparatively lower taxable income. Keep account identifiers out of your worksheet.