Core Insights - The article highlights the potential tax implications of tax-deferred retirement accounts like 401(k)s and IRAs, emphasizing the need for proactive planning to avoid large tax bills in retirement [1][3] Group 1: Current Statistics - As of August 2025, the average 401(k) balance for individuals in their 50s is $622,566, with approximately 595,000 Americans holding over $1 million in their 401(k) accounts [2] - The number of millionaires created through IRAs reached a record high of 501,481 in the second quarter of 2025 [2] Group 2: Tax Implications - Millions of Americans face the risk of significant tax bills due to required minimum distributions (RMDs) from their retirement accounts, which can lead to higher tax brackets and increased taxes on Social Security benefits [3] - Without proper planning, retirees may also see a rise in Medicare premiums as a result of higher income levels triggered by RMDs [3] Group 3: Strategies for Tax Management - Tax gain harvesting is recommended as a strategy to manage tax exposure, allowing individuals to take advantage of capital gains tax rates, which are 0% up to $48,350 for individuals and $96,700 for married couples in 2025 [4] - By gradually withdrawing from tax-deferred accounts and selling appreciated investments, individuals can reduce their tax-deferred balances and future RMDs, thereby minimizing tax liabilities [5] - Roth conversions are suggested as another effective strategy, allowing individuals to convert tax-deferred savings into Roth IRAs, which do not have RMDs and provide tax-free withdrawals in retirement [6] - This strategy is particularly beneficial during the gap years before RMDs begin at age 73, especially if individuals experience a temporary reduction in income and tax rates [7]

Contribution Limits - The IRS has increased the IRA contribution limit for 2026 to $7,500, up from $7,000 [1][14] - For individuals aged 50 and older, the total allowed contribution including catch-up contributions is $8,600 [1][14] Types of IRAs - The contribution limit applies to both traditional IRAs and Roth IRAs, or a combination of the two [1][2] - There are no income limits for contributing to a traditional IRA, but income limits apply for deductions if covered by a workplace retirement plan [8] Catch-Up Contributions - Individuals aged 50 and older can make an additional catch-up contribution of $1,100 [1][2] RMDs (Required Minimum Distributions) - Traditional IRAs are subject to RMDs, which are required once the account holder reaches age 73, as per the Secure Act 2.0 [12] - Roth IRAs do not have RMDs, allowing for tax-free growth without mandatory withdrawals [12] Deadlines - The deadline to fund an IRA for the tax year 2026 is April 15, 2027 [17]