Tax Experts Flag 3 Retirement Traps as RMD Mistakes Trigger 25% Penalties
Updated
Updated · AOL · Aug 7
Tax Experts Flag 3 Retirement Traps as RMD Mistakes Trigger 25% Penalties
3 articles · Updated · AOL · Aug 7
Summary
Three issues stand out for retirees: choosing where to live, understanding how Social Security is taxed, and managing required minimum distributions once withdrawals begin.
Up to 85% of Social Security benefits can become taxable when retirees have other income, and that first year of RMDs can unexpectedly push more benefits into the tax net.
Age 73 is the key RMD threshold for traditional IRAs, 401(k)s and similar accounts; missing a required withdrawal can bring a 25% excise tax, reduced to 10% if corrected within two years.
State tax breaks alone may not make a move worthwhile, experts said, because property, sales, estate and inheritance taxes can offset savings and distance retirees from family support they may later need.