How Long Can I Keep My Money in My Retirement Account? SHP Financial

In most cases, you can’t actually keep your money in your retirement accounts forever. Even if you don’t need the money from your retirement accounts, many of them will require you to begin withdrawing from them when you are 73 years old.[1] This is called a required minimum distribution (often shortened to RMD).

More specifically, you must start taking RMDs by April 1st following the year you turn 73.[2] The amount you are required to withdraw is calculated by dividing the value of the account on December 31st of the previous year by a factor based on your life expectancy.[3] The IRS website has tables that can help you to calculate your RMDs. Find them here.

With the Secure Act 2.0, designated Roth 401(k) accounts in 2024 will not have to take RMDs in their lifetime.[4]

So why can’t you just leave your money in your account? It’s your money, after all. The reason RMDs exist is that many retirement accounts are pretax vehicles, meaning the money that you have put into them has not been taxed yet. If you could leave the money in the account indefinitely, the government would never be able to tax the money.[5]

One thing to note: you can take the money out of your account at any time. It is often recommended that you be strategic about your withdrawals (because of various tax interactions), but once you are old enough to withdraw from your accounts, you have unlimited access to them. So you can take more than your RMDs once you begin to withdraw them; you are not required to take only the specified amount outlined in the RMD table.

RMDs are very important to understand for inherited retirement accounts. If you pass away and your beneficiary receives the contents of your retirement account, it is possible they will have to immediately begin taking RMDs.[6]

There are major penalties for not taking RMDs–if you don’t begin to take them when you are required to, the amount not withdrawn is subject to a 25% tax. [7]

Planning for RMDs is essential for retirement planning. If you are looking for more information about RMDs, or retirement in general, feel free to Click HERE to reach out to us at SHP Financial, and we can guide you through this complex process.

 

The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
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