Core Insights - Required Minimum Distributions (RMDs) pose challenges for retirees, and converting to a Roth IRA can alleviate these concerns [1][3] - A Roth conversion allows individuals to avoid RMDs since taxes are paid upfront, but this may lead to higher costs depending on the tax situation [2][8] RMD Overview - RMDs apply to pre-tax retirement portfolios starting at age 73, requiring minimum annual withdrawals to ensure tax payments on retirement funds [3][4] - The withdrawal amount is determined by the portfolio's value and the account holder's age, with the rule applying to each portfolio separately [4] Financial Implications - For example, a 60-year-old with a $1.1 million IRA could see the account grow to approximately $2.99 million by age 73, necessitating a withdrawal of $112,890 and a tax payment of at least $17,000 [5] - Converting to a Roth IRA eliminates RMD requirements, allowing funds to remain invested until needed [6][7] Roth Conversion Details - A Roth conversion involves transferring funds from a traditional IRA to a Roth IRA, providing tax-free withdrawals in retirement and exemption from RMD rules [7] - The primary drawback of a Roth conversion is the upfront tax liability on the converted amount, which must be paid in the year of conversion [8]

Roth IRA Contribution Strategy - Traditional IRA 的 required minimum distributions (RMDs) 可用于 contribute to a Roth IRA，如果满足收入要求 [1]

Core Insights - The IRS has released the federal income tax brackets for the tax year 2026, which will impact tax returns filed in 2027, highlighting the importance for individuals, especially retirees, to understand their tax positions [2][3] Tax Brackets Overview - The new tax brackets for single filers and married couples filing jointly are as follows: - 37% for income over $640,601 (single) and $768,701 (married) - 35% for income between $256,226 and $640,600 (single) and $512,451 to $768,700 (married) - 32% for income between $201,776 and $256,225 (single) and $403,551 to $512,450 (married) - 24% for income between $105,701 and $201,775 (single) and $211,401 to $403,550 (married) - 22% for income between $50,401 and $105,700 (single) and $100,801 to $211,400 (married) - 12% for income between $12,401 and $50,400 (single) and $24,801 to $100,800 (married) - 10% for income of $12,400 or less (single) and $24,800 or less (married) [4] Strategic Financial Planning - Understanding tax brackets can guide retirement withdrawal strategies, helping individuals decide which accounts to withdraw from and in what order to minimize tax liabilities [5] - Most retirement income sources, including Social Security, pensions, and RMDs from IRAs and 401(k)s, are taxable, making the timing and order of withdrawals critical to managing tax bills [6][8] Importance of Tax Awareness - Distributions from retirement accounts like 401(k)s and traditional IRAs are taxed as ordinary income, and failing to monitor tax brackets can lead to unintentional higher tax rates due to increased taxable income from these distributions [7] - Knowing projected income from retirement accounts in 2026 is essential for understanding tax implications and planning for tax bills in 2027 [8] Roth Conversion Strategy - Experts recommend performing Roth conversions during lower-income years to potentially reduce tax burdens for both individuals and their heirs [9]

As 2025 winds down, here are some moves to help you finish the year strong financially. Morningstar’s director of personal finance and retirement planning, Christine Benz, discusses strategies. This interview has been edited for length and clarity. Benefits of Rebalancing Your Portfolio Q: What are the benefits of portfolio rebalancing, and who most needs to do it? A: The main benefit of rebalancing is risk reduction. You trim securities that have performed really well, presumably ones with higher valua ...

Core Points - The IRS mandates required minimum distributions (RMDs) from retirement accounts starting at age 73, impacting tax-advantaged accounts like IRAs and 401(k)s [3][4] - RMDs are calculated based on the account's value and the account holder's age, with specific withdrawal amounts required annually [4][5] - Inherited retirement accounts also have RMDs, which must be withdrawn within a certain timeframe, typically 10 years [6] Group 1: RMD Rules and Requirements - RMDs apply to pre-tax retirement accounts, excluding Roth IRAs and, starting in 2024, Roth 401(k)s [3] - Each qualifying account requires its own minimum withdrawal, meaning multiple accounts lead to multiple RMDs [4] - For example, a $500,000 IRA would require a minimum withdrawal of $18,867 by the end of 2025 [5] Group 2: Managing RMDs - RMDs should not simply be deposited into a checking account; instead, they can be strategically managed for growth [7] - Options for managing RMDs include transferring funds into safer investments like certificates of deposit (CDs) or Treasury bonds to mitigate risk and combat inflation [7]

“Is there a way, with their permission, that I can oversee these funds at least until they are a bit older?” (Photo subjects are models.) - Getty Images/iStockphoto Dear Quentin, My college-age kids are inheriting $150,000 each, mostly from a 401(k) so the money is taxable. I am still going to pay for college, so this money is likely to be saved for the purchase of homes in 10 years or so. My thought is they should start withdrawing it from the 401(k) now while they have little or no income and taxes wil ...

You may not have to take a retirement plan withdrawal, but it's important to understand the rules.One of the nice things about saving for your senior years in a traditional retirement plan is getting to score a tax break on the money you contribute. If you're a higher earner, that tax break could be especially lucrative.Plus, with a traditional IRA or 401(k), your money grows on a tax-deferred basis. You don't have to pay taxes on investment gains year after year as you do with a regular brokerage account. ...

Core Points - The IRS mandates annual withdrawals from traditional IRAs, 401(k)s, and other tax-deferred retirement accounts, with the current required minimum distribution (RMD) age set at 73, increasing to 75 in 2033 under the SECURE 2.0 Act [2][3] Group 1: RMD Mechanics - RMDs are calculated based on the account balance at the end of the previous year divided by the IRS life expectancy factor [4] - For instance, a 74-year-old with a $200,000 IRA balance would have an RMD of $7,843, calculated using a life expectancy of 25.5 years [5] Group 2: RMD Timing - Individuals born before July 1, 1949, must take their first RMD at age 70 ½, while those born between July 1, 1949, and 1950 must start at age 72 [5] - Those born between 1951 and 1959 must take their first RMD by April 1 of the year after turning 73, and individuals born in 1960 or later must do so by April 1 of the year after turning 75 [5] Group 3: Postponing RMDs - The IRS allows postponement of the first RMD until April 1 of the following year, which can be beneficial for tax planning [6] - For example, a person born in 1952 can start RMDs this year but can wait until April 1, 2026, to withdraw [6] - Postponing the first RMD may be advantageous if a spouse is still working, potentially resulting in a lower tax bracket by the time the withdrawal is made [9]

Core Insights - Qualified Charitable Distributions (QCDs) allow retirees to donate directly from their IRAs to charities, which can reduce their taxable income more effectively than standard deductions [5][16] - A significant majority of Americans, 91%, opt for standard deductions, which means their charitable donations do not lower their taxable income [2][4] - Retirees aged 70½ or older can donate up to $108,000 annually through QCDs, with the limit adjusting for inflation due to the Secure Act 2.0 [3][4] Group 1: QCD Mechanism and Benefits - QCDs are direct transfers from a pretax IRA to a registered charity, keeping the transaction off the tax return and avoiding taxable income [5][8] - For retirees who must take Required Minimum Distributions (RMDs), QCDs can fulfill this requirement while avoiding tax implications [7][16] - QCDs are particularly beneficial for retirees with IRA balances in the mid-six figures or higher, although those with smaller IRAs can still see some tax benefits [4][16] Group 2: Implementation and Considerations - To execute a QCD, funds must be in an IRA; if held in a 401(k), a rollover to a traditional IRA is necessary [14][15] - Timing is crucial, as IRS rules require rollovers to be completed within 60 days to avoid penalties [15] - It is essential to verify that the charity is a qualified 501(c)(3) organization, as donor-advised funds and private foundations do not qualify for QCDs [18]

Core Points - The article discusses the calculation and planning of Required Minimum Distributions (RMDs) for retirement accounts, specifically for individuals turning 73 in 2027 [6][4][10] - It emphasizes the importance of understanding the life expectancy divisor from the IRS's Uniform Lifetime Table, which is crucial for determining RMD amounts [2][11] - The article highlights the flexibility in withdrawing RMDs from multiple IRAs, allowing for aggregated withdrawals from any single account or combination of accounts [13][12] RMD Calculation - To calculate RMD, divide the account balance as of December 31, 2026, by the life expectancy divisor; for example, a $1 million balance divided by 26.5 results in an RMD of approximately $37,736 [7][1] - RMDs must be taken by the end of the calendar year, with the option to defer the first RMD until April 1 of the following year, which could lead to two distributions in one year [9][10] Account Types and RMDs - Traditional IRAs, 401(k)s, 403(b)s, and other tax-deferred accounts are subject to RMDs, while Roth IRAs are not included in the calculation [3][6] - RMDs for 401(k) accounts must be taken from each account individually, unlike IRAs where the total RMD can be taken from any single account [14][13] Planning Considerations - The article suggests that retirees should consider their overall retirement income, including Social Security and pensions, when planning for RMDs [17] - It also notes that if retirement expenses exceed the RMD, additional withdrawals may be necessary to meet financial needs [12][17]