Required minimum distributions (RMDs) can become a major retirement income event. Traditional IRAs and many workplace retirement plans cannot simply be left untouched indefinitely. At a certain age, retirees generally must begin taking withdrawals, whether they need the money for spending or not.
That matters because RMDs can increase taxable income later in retirement. A retiree who avoids withdrawals in the early years may feel tax-efficient at first. Still, larger account balances can eventually produce larger required distributions. Those distributions may affect taxes, Social Security taxation, and the overall cash flow plan.
Planning before RMDs begin may create more choices. Some retirees may benefit from strategic withdrawals, partial Roth conversions, charitable giving strategies, or simply spreading income more evenly over time. The best choice depends on the individual situation, but ignoring RMDs can make later retirement less flexible.
To understand why RMD planning should begin before the first required withdrawal arrives, read the full article, “Coordinating Retirement Income: 401(k)s, IRAs, and Social Security.”