Here’s how to use required retirement withdrawals to improve your portfolio
After funneling money into pretax retirement accounts, you’ll eventually face mandatory withdrawals in retirement known as required minimum distributions, or RMDs.
Since RMDs can trigger higher taxes, the withdrawals can be a nuisance for some retirees who don’t need the money. But the yearly activity could offer a chance to improve your portfolio, experts say.
“Ultimately, you look at your portfolio and say, what do I want to trim?” said certified financial planner Matthew Saneholtz, chief investment officer and senior wealth advisor at Tobias Financial Advisors in Plantation, Florida.
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Since 2023, most retirees need to begin RMDs by age 73, based on changes enacted by Secure 2.0. That age jumps to 75 starting in 2033.
While the annual RMD deadline is Dec. 31, you’ll have until April 1 after the year you turn 73 to make your first RMD. If you skip yearly RMDs or don’t take enough in a given year, there’s a 25% penalty on the amount you should have withdrawn.