2 Tax Rules New Retirees Need to Know | Smart Change: Personal Finance

When you retire, your tax liability doesn’t disappear. But you’ll have to take control of learning the rules and follow them carefully to avoid penalties. In particular, there are two big tax rules new retirees must know.

The first and most important tax rule every new retiree should learn about relates to required minimum distributions (RMDs). RMDs are withdrawals you must begin making from certain tax-advantaged retirement accounts beginning at age 72. You must begin taking these required distributions from:

• Profit-sharing plans
• Traditional and Roth 401(k) plans
• 403(b) plans
• 457(b) plans
• Traditional IRAs
• SEP IRAs
• SARSEPs
• Simple IRAs

RMDs are not, however, required from Roth IRAs as long as the owner of the Roth IRA is still alive.

You can calculate the amount you must take out by using IRS life-expectancy tables. There are different ones, with most retirees using the Uniform Lifetime Table (others can…