One of the biggest falsehoods about retirement is that it’s a time when you have no further obligations. While it’s true that you may not have to go to work, you still have some serious responsibilities that can’t be ignored.

One of those obligations that sometimes catches retirees by surprise is the Required Minimum Distributions, also referred to as RMDs. For those of you that need a refresher; at age seventy-and-a-half you are required by law to start taking money out of your tax-advantaged savings accounts like 401k’s and IRA’s. Those retirement accounts that have been accruing tax-deferred money up to this point will now be subject to income tax upon their withdrawal.

If you forget to take your RMDs, the penalty is 50% of the amount you were required to withdraw. While the government does allow a grace period for the first year of your RMDs, you’ll want to make sure to put reminders all around your house because missing this deadline can be very costly.

Like everything else in retirement planning, having a strategy for your RMD withdrawals is very important and should be part of your overall retirement plan. You’ll also want to avoid paying too much in taxes by inadvertently putting yourself in a higher tax bracket when taking withdrawals.

If you’re not absolutely sure whether your retirement plan is completely integrated and accounts for RMDs, maybe it’s time we discuss. During our complimentary, no obligation financial review, we’ll discuss how to create separate income buckets that incorporate the withdrawal strategy that minimizes your tax burden and has a well-thought out strategy for your RMDs.

There are many moving parts to creating an effective retirement strategy and we’ll design one to help you reach your retirement goals. So remember, with a solid strategy and careful planning you can get back to enjoying a carefree life in retirement.