A Certified Financial Fiduciary, Robert M. Ryerson has provided financial services through New Century Planning since 1998. In addition to helping clients reach their financial goals, Robert M. Ryerson writes articles on best practices for retirement planning, including the article, "Be Aware of the RMD Trap," for forbes.com.
The article highlights the importance of researching how required minimum distribution (RMD) rules and regulations impact retirement planning for individuals who will enter a higher tax bracket in retirement. For such individuals, the traditional wisdom of postponing tax payments by investing funds in IRAs and 401(k)s may result in paying more taxes in retirement.
Until at least 2025, those planning for retirement may utilize a strategy to avoid paying more taxes by opening a Roth 401(k) or converting IRAs to Roth status when they retire, with greater gains typically possible before the age of 70 and a half. The strategy takes advantage of the fact that there are no income limits on Roth conversions and no additional RMDs on Roth IRA accounts. Through careful planning, individuals who will find themselves in a higher tax bracket after retiring may decrease the total tax rates on RMDs to a level where they are offset by standard or itemized deductions.
