Knaub & Company, PC

Certified Public Accountants

78 Meadow Village Drive, Suite E

PO Box 161030, Big Sky, MT 59716


Phone:  406-995-6040

Fax:      406-993-2772



May 2018

You're Retired! Now What?

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You worked a lifetime to build your retirement assets, now how do you take distributions? Any discussion about retirement income usually starts with required minimum distributions, or RMDs.


If you contributed to any qualified retirement plans or accounts, including a 401(k) plan and traditional IRA, you must begin taking RMDs by age 70 1/2, with some exceptions. Your plan custodian or advisor should determine your RMD by using uniform life expectancy tables. If you don’t take your full RMD, you'll pay a 50% tax on the amount not taken.


Once you get your RMD squared away, compare your tax rates on taxable and tax-deferred investments if you need to withdraw
additional funds. For the former, capital gains on investments held at least a year and a day aren’t taxed (at 15%) until your adjusted gross income reaches$77,200 (married filing jointly). The same couple’s income must exceed $479,000 to trigger a 20% tax.

If your ordinary income tax bracket is lower than the capital gains rate, you might consider tapping the tax-deferred accounts rather than realizing taxable gains. If the tax rates are similar, consider letting the tax-deferred potential build-up if your qualified retirement plans continue. Capital gains are realized in the year the investment is sold.


After you’ve tapped your other assets, you might begin spending down a Roth account, which doesn’t have RMDs and whose distributions are tax-free.


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