Ask the Retirement Expert: What Changes When I Hit 70 in Retirement?
Each week our Northwestern Mutual retirement experts answer your questions. This week’s question:
I’ve been retired since age 65, but someone told me that I need to get prepared for things to change when I turn 70. Is that true? What changes do I need to think about?
It’s important to be mindful and proactive in retirement as age 70½ approaches. Many people are not aware that when you turn 70½, the IRS forces you to take required minimum distributions (RMDs) from your IRA and/or 401(k) whether you need the income or not.
If you’re like many retirees, you’ve been trying not to make substantial withdrawals from your IRA since it’s considered taxable income. The IRS will not allow you to avoid paying taxes on this money forever!
- Related: Download Northwestern Mutual’s Free Guide: Social Security Simplified: Select the Right Options to Maximize Your Income
If you think that’s bad news, it might be even worse: Have you deferred collecting your Social Security checks until age 70 in order to maximize the benefit you’ll receive? Then you’re going to have Social Security coming in at 70, as well as your required minimum distribution beginning at 70½.
All of this income could potentially put you into a higher tax bracket—something most retirees never anticipated at this age. The earlier you are aware of these rules, the sooner you can start preparing. Your financial and tax professionals can help you develop strategies to minimize your tax burden.
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