For Mark Roberts’ Use: How long have you been planning for retirement? What has been your main focus, so far?

For most people the primary objective, with regard to retirement planning, involves saving money. You want to know how much money you will need in retirement, and how much you should contribute to a retirement account each year. But when you actually reach your target retirement date, your focus will shift from saving money to budgeting that money. After all, you want your retirement income to last for the rest of your life!

Most retirement accounts allow you to begin taking distributions as early as age 59 ½. Indeed, some people need to do so, due to an unplanned early retirement. However, in most cases people find that it’s beneficial to continue working into their sixties, pay down debts, and build up that retirement account a bit more. You can potentially retire on a more comfortable income, and waiting to begin distributions can help the money to last longer.

On the other end of the spectrum, keep in mind that tax-advantaged retirement accounts require distributions to begin by age 70 ½. Otherwise, the IRS will impose a stiff tax penalty.

So, waiting longer to take that first distribution is beneficial, up to a point. If you wait all the way until age 70 ½, though, there is something important you need to know: You must take that first distribution by April 1 the following year, but your next required minimum distribution (RMD) must be taken by December 31 of that same year. For some people, taking two distributions in one year can bump them into a higher tax bracket, and trigger higher taxes. You might find yourself wishing you had taken that first RMD just a bit earlier!

And of course, other income can affect your tax bracket as well. So there are many issues to consider when timing your first distribution from a retirement account.

It’s important to maintain regular appointments with a skilled financial advisor throughout the retirement planning phase of your life, so that we can help you navigate distributions, taxes, investment strategies, and other issues. Come in and see us, and we can help you decide upon a retirement timetable that feels comfortable for you.