5 Things you Need to Know about Retirement Accounts

So retirement accounts are cool but there are a lot of loopholes you need to learn about, and of course, all of these 5 ideas are 100% legal.

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1. RMDs: Required Minimum Distributions
– These rules only really apply to pre-tax retirement plans
– Because the governments once you turn 70.5 wants you to ahead and start taking money out
– So then they can start collecting taxes ( and if you don’t then they also give a massive penalty of 50% of the money that should have been taking out)

To calculate this: you need to take into account your age and also account balance ( basically how old you are today and by what date you’re going to be gone)
– You basically divide your account balance by your life expectancy and that’s how you get the RMDs
– Or just use a calculator online or take a look at the uniform life expectancy chart

2. The Order to take from Retirement Accounts
– Let’s say you have a Roth 401k, a 401k and a Roth ira and maybe even a traditional ira
– Which accounts do you take from first and which accounts do you let build up even future
– This important because if you do incorrectly it could cost you a lot of money

The plan is:
– You should take from the Taxable accounts first because that way you give more time for nontaxable accounts to grow
– And in the future, those accounts will not require to pay taxes and will give you a lot of legroom.
– So just remember to use the tax accounts first.

3. If you have multiple IRA and retirement accounts
– This most likely going to apply to a lot of in the future
– Because the world is constantly changing and a lot of jobs will become obsolete
– So its important you know how to track all those retirement accounts

The simple answer is:
– Say you worked at McDonalds and you had a retirement account and now you work at burger king with a new retirement account, and over the past 10 years you’ve worked at every fast food restaurant and have over 10 retirement accounts
– What do you to track them, the answer just open up a traditional ira, and ask you, past employers, to roll over into your One ira accounts
– That way everything is in one place and have a lot less paperwork

4. In-Kind Withdrawals and they qualify as RMDs
– This is in case you are 70.5 and forced to make money out of your retirement but you don’t need to
– Instead of selling investments you can actually transfer them into a taxable account ( and that’s called in-kind withdrawal)
– It can also save you some money on taxes

For example, this called NUA ( Net Unrealized appreciation and its pretty badass)
– Say you bought 100k worth of apple stock and over 30 years its worth $1M dollars
– Well if you transfer it in-kind to a taxable account, you only get taxed on the $100k you paid for it and not the appreciations until you actually decide to sell
– But by that point, you have a lot more options ( and a lot less rules to follow )

5. Roth Conversion ladder
– Where instead of taking a penalty for taking money out early and worrying about taxes and rules in the future
– You deal with it today and get over it
– And the basic idea is to roll over a pretax account into a after-tax account like a Roth ira

For example:
– Let’s say I have $300k in my retirement account pretax ( 401k )
– – I can roll that money tax-free into a traditional ira
– Then I can roll over amounts I’ll need for retirement in 5 years or so every year ( so if I need 50k, I can roll that over every year until my traditional ira is at 0) – but I only tax on the 50k each year over time

In the end: I have a Roth ira 100% tax-free with a lot fewer rules and also no RMD.

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Disclosure & Educational Disclaimer:
Some links in this video may be affiliate links, and I may earn a commission. Content is educational and accurate as of posting; offers may change. I’m an accountant but not your accountant; always consult your own accountant/CPA or financial advisor. No income or results are guaranteed.

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