best time to retire
I am wondering if there is a best time of year for my client to retire and take out the least amount of required distribution from her 401(k) and subsequent rollover IRA.
She is 76 years old and still works full time. She is not a 5% owner in the company.
Thanks
Permalink Submitted by Alan - IRA critic on Sat, 2016-12-03 00:12
It depends because there are trade offs for this decision. For most people it would be better not to retire in the last portion of the year because they will have an extra RMD year compared to working into the following year. However, if the client were to retire this month, as long as they do not do the IRA rollover this month as well, the 2016 RMD can be postponed to as late as 4/1/2017. The 2017 RMD would also have to be distributed before doing an IRA rollover in 2017, but for most people two years of RMDs would be less income than close to a full year of earnings. There is plenty of flexibility, and the general goal would be to keep taxable income fairly even from year to year and avoid spikes in income that would increase the marginal rate for a year. Again, both the annual job earnings and the RMD amounts can vary considerably to actual numbers for the client must be crunched because she might not fall into the average expected situation. Remember, the first RMD cannot be delayed unless the IRA rollover is also delayed since the RMD must be distributed before the rollover.