If you do not take the minimum distribution from any given portfolio, you generally will be charged a 50% excise tax on the amount not taken. For example, say that you under-draw your account by $5,000. The IRS may charge you up to $2,500 in taxes on that error. If you do make a mistake, in some situations the IRS can waive some tax penalties. This is most common if you voluntarily report and correct your mistake, and if it was good-faith error.When you withdraw this money, as always with a pre-tax portfoli ...

Core Insights - The article discusses IRS-approved tax shelters that can legally reduce tax liabilities for individuals, emphasizing the importance of compliance with tax laws [1][2] Tax Shelters Overview - Retirement accounts such as 401(k) and IRAs allow taxpayers to defer taxes until retirement, potentially lowering their tax burden when they withdraw funds [3][6] - The projected contribution limits for IRAs in 2026 are $7,500 for individuals under 50 and $8,600 for those 50 and older, reflecting an increase from 2025 limits [4] - Real estate investments provide tax advantages through various deductions, including mortgage interest and property taxes, although itemizing deductions is necessary [4][5]

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. A 27-year-old finance worker who inherited $1 million from his late mother wrote on Reddit, "I just feel stupid fretting over a 6% match," referring to his company's retirement plan. He earns $120,000 a year and said he's unsure whether to keep saving now that the inheritance is held in a trust. In a post shared on Reddit's r/Fire, the original poster explained that he doesn't plan to draw from the trust e ...

Core Insights - The article discusses the importance of understanding Required Minimum Distributions (RMDs) for retirees, particularly those with pre-tax retirement accounts [3][4]. Group 1: RMD Overview - RMDs are mandatory withdrawals from pre-tax retirement accounts that must begin at age 73, ensuring that taxes are eventually paid on these funds [3][4]. - The IRS imposes strict rules regarding the timing and amount of RMDs, with significant penalties for non-compliance, including a 25% penalty on amounts not withdrawn in time [4]. Group 2: RMD Calculation - RMD calculations are based on the year-end balance of retirement accounts and the retiree's life expectancy, using the IRS Life Expectancy Table to determine the RMD factor [7]. - An example illustrates the calculation: a retiree with a $150,000 IRA balance at year-end would have an RMD of $5,882.35 for the following year, based on a factor of 25.5 [8]. Group 3: Withdrawal Flexibility - Retirees are not required to take their RMD in a single payment; they can opt for multiple withdrawals throughout the year and can withdraw more than the minimum if needed [9].