Smart investors diligently save for decades to help ensure they are prepared for retirement. This includes taking advantage of tax-deferred accounts. These accounts, otherwise known as Traditional accounts, can provide two main benefits for investors.
- You will generally receive a tax break in the year that you contribute to the account.
- You will avoid having to pay taxes on investment income and capital gains while the funds are still in the account.
While these tax breaks can be very beneficial for savers, they do not last forever.
Owners of tax-deferred accounts are required to begin making withdrawals each year, starting at a certain age. This is known as a Required Minimum Distribution (RMD).
Recent legislation, known as the SECURE Act, has changed RMD age limits.
Your first RMD would be due by April 1st in the year after the year you turn 73. Your next RMD would be due by the end of the year, and then your RMDs would be due at the end of each year moving forward.
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