A new year means a lot of resetting things in our lives.
It means new calendars on the desk and hanging on the wall. It means a month or so of fixing it when you jot the date with the old year.
And just like another year usually means an annual checkup with your doctor, it should also mean an annual checkup on your retirement plan. No waiting room here, though – let's dive in.
Are You Putting Money In?
First, let’s talk about Individual Retirement Accounts, or IRAs. Choosing the right type of IRA is crucial. The two primary types are the Traditional IRA and the Roth IRA, each with its own tax implications.
With a Traditional IRA, your contributions are typically tax-deductible, and your investments grow tax-deferred. You only pay taxes when you withdraw in retirement. This can be a great option if you expect to be in a lower tax bracket after retirement.
On the other hand, a Roth IRA offers tax-free growth and tax-free withdrawals in retirement. While contributions are not tax-deductible, this account is ideal if you anticipate being in a higher tax bracket later on or prefer tax-free income during retirement.
Understanding contribution eligibility is key. Both Traditional and Roth IRAs have guidelines for regular, spousal, and catch-up contributions. For instance, if you're 50 or older, you can make catch-up contributions, allowing you to save more as you near retirement.
Is It Time to Take Money Out?
Now, let’s address when it's time to start withdrawing from your IRAs, as required by law. This involves Required Minimum Distributions, or RMDs.
RMDs are amounts you must withdraw annually from your retirement accounts, starting at a certain age.
What age? Let's look.
If you turned 70 ½ in 2019 or a prior year, you'll continue taking your RMDs uninterrupted, also those who turned 72 in 2020-2022 continue their RMD obligation as well.
You might be asking, when do I turn 70 1/2? If you're not a person who regularly celebrates your half-birthdays, here's a tip to remember: If your 70th birthday is in the first half of the year, then you turn 70 and a 1/2 in that same year.
If you turned 73 in 2023, you were required to have your RMD completed by April 1st, 2024.
If you turn 73 in 2024, you must take your first RMD by April 01, 2025, and a second one by the end of 2025. Then every year moving forward your RMD will need to be complete no later than December 31st.
In 2033, the RMD age will increase to 75 for those born on or after January 1, 1960.
The Ongoing Journey
Retirement planning is an ongoing journey, and it's never too late to make impactful changes.
Remember you can always go here in Radiant's Retirement Central to handle IRA transactions.
If you want to review or adjust your IRA strategies, we're here to help. You can reach out to us via call, email, or by visiting your nearest Radiant branch.
We're excited to provide you with any guidance and support you need.
