Take the Money, Please

RMD table. Example: a 71-year-old with a $200,000 IRA must withdraw
at least $200,000/26.5 = $7,547.17 in the current year.

Required Minimum Distributions (RMDs) from IRA and 401(k) accounts have basic rules that are simple to understand---when taxpayers turns 70½ they must start withdrawing a minimum amount based on their remaining actuarial life--but there are traps to avoid. For example:

But be sure to avoid another common mistake in this area, which is when one spouse takes the entire required payout for both spouses if each has IRAs. Instead, each partner must take such payouts from his or her own accounts.

On the plus side there are some ways to defer withdrawals after 70½:

There’s also a useful exception for employees who participate in workplace plans such as 401(k)s and are still working after age 70½. If these workers don’t own more than 5% of the company and their plan doesn’t mandate payouts at 70½, then they needn’t take required withdrawals from the plan until they retire.

IRA owners can also exclude up to $125,000 of assets from the base for computing required payouts if they use the assets to buy “qualifying longevity annuity contracts,” or QLACs. These are IRS-approved deferred annuities that don’t pay out until the owner reaches age 85, and they help make sure savers won’t outlive their assets.

I began taking distributions from my 401(k) and IRA accounts when I turned 59½, the age at which withdrawals are no longer penalized. During low-income years I take cash from retirement accounts, during high-income years from regular savings and brokerage accounts. Don't be greedy; if you're an oldster with significant retirement savings and you're paying zero taxes, you're not minimizing your long-term tax burden.

Age is only a state of mind, and life choices are one's own, but not according to tax law: 59 is too early to be retired, but by 70 everyone should be.