One big misconception a lot of people have about retirement is that they won't have to pay a lot of taxes. In reality, there are many different income sources that the IRS could get a piece of. For example, dividends you receive in a regular brokerage will be taxed, and you'll face capital gains taxes if you sell investments at a profit. And if you have your retirement savings in a traditional IRA or 401(k) plan, those withdrawals will be taxable as well. Even your Social Security benefits may be taxable, ...

Core Insights - The article emphasizes the importance of getting financial affairs in order as 2025 comes to a close, particularly for retirees who need to consider their required minimum distributions (RMDs) before 2026 begins [1] Required Minimum Distributions (RMDs) - Individuals aged 73 or older with traditional retirement accounts must take RMDs, as mandated by the IRS to prevent tax-advantaged wealth transfer [3] - The first RMD is due by April 1 of the year following the individual’s 73rd birthday, while subsequent RMDs must be taken by December 31 of each year [4] - Failure to take the required distribution can result in a 25% penalty on the amount that should have been withdrawn, which may be reduced to 10% if corrected promptly [4] Calculating RMDs - RMDs are calculated based on the account balance and life expectancy, with financial institutions typically providing this calculation [5] Managing RMDs - For retirees who do not need their RMDs, these distributions can create an immediate tax burden [6] - One strategy for managing RMDs is to utilize a qualified charitable distribution (QCD), which allows funds to be transferred directly to a charity, satisfying the RMD requirement while excluding the amount from taxable income [7] - Alternatively, retirees can take their RMD and reinvest it in a traditional brokerage account or other investment vehicles, although taxes will still apply to the distribution [8]