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What Does Your Retirement Tax Future Hold?

  • Oppenheimer & Co. Inc.
  • January 30, 2024

A Guide to Optimizing Your Retirement Finances

Reviewing and understanding the tax implications of your retirement account is fundamental for achieving your long-term financial goals. Each retirement plan has different tax requirements that can impact your nest egg. This guide provides an overview of contributions, withdrawals, and Required Minimum Distributions (RMDs) for each individual retirement plan, so you may remain confident in your future savings.

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Roth IRA

Key Insight: Roth IRAs can be ideal plan for estate planning.

  • Contributions: Made with after-tax dollars and are not tax-deductible. You may withdraw contributions at any time without penalty or tax.
  • Withdrawals: Qualified withdrawals are tax-free.
  • RMDs: None during the account owner's lifetime.

Traditional IRA

Key Insight: A traditional IRA is generally best suited for individuals who expect to be in a lower tax bracket in retirement.

  • Contributions: Depending on your income and whether you or your spouse have coverage from a work retirement plan, contributions may be tax-deductible.
  • Withdrawals: Generally taxed as ordinary income. There may be penalties for early withdrawals before age 59½, however there are exceptions.
  • RMDs: You are required to start taking RMDs at age 73, which are taxed as ordinary income.

Traditional 401(k) and 403(b) Plans

Key Insight: 401(k) and 403(b) Plans offer tax benefits through traditional pre-tax contributions, but withdrawals are taxed as ordinary income, and early withdrawals may incur penalties. RMDs start at age 73 and are taxed as ordinary income, emphasizing the need for strategic retirement planning.

  • Contributions: Reduces your taxable income in the contribution year and are typically made with pre-tax savings.
  • Withdrawals: Taxed as ordinary income, however early withdrawals may be subject to a 10% penalty.
  • RMDs: You are required to start taking RMDs at age 73, which are taxed as ordinary income.

Roth 401(k) and 403(b) Plans

Key Insight: Roth 401(k) and 403(b) Plans offer tax advantages through after-tax contributions, enabling tax-free withdrawals upon meeting criteria.

  • Contributions: Made with after-tax income, thereby not reducing taxable income in the contribution year.
  • Withdrawals: Qualified withdrawals, including earnings, are tax-free, provided certain conditions are met.
  • RMDs: Unlike traditional plans, Roth versions have no required minimum distributions (RMDs) during the life of the participant, providing greater flexibility in retirement planning.

Health Savings Accounts (HSAs)

Key Insight: HSAs are most beneficial for paying for near-term medical expenses as well as expenses in retirement.

  • Contributions: Tax-deductible and your account grows tax-free.
  • Withdrawals: For eligible medical expenses, withdrawals are not taxed.

Traditional SEP and SIMPLE IRAs

Key Insight: SEP and SIMPLE IRAs are best suited for small business owners and sole proprietors.

  • Contributions: These are employer-sponsored plans that allow for tax-deductible contributions, similar to a traditional IRA.
  • Withdrawals: You may distribute funds at any time, however early withdrawals made before age 59½ may be subject to a 10% penalty.
  • RMDs: You are required to start taking RMDs at age 73, which are taxed as ordinary income.

Navigating the tax implications for your retirement plan may seem complex, but understanding these basics is essential to maximize your retirement assets. Proper forecasting can help to ensure that you optimize retirement savings. Speak with an Oppenheimer Financial Professional to learn more.


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The information contained herein is general in nature, has been obtained from various sources believed to be reliable and is subject to changes in the Internal Revenue Code, as well as other areas of law. Neither Oppenheimer & Co. Inc. (“Oppenheimer”) nor any of its employees or affiliates provides legal or tax advice. Please contact your legal or tax advisor for specific advice regarding your circumstances. This material is not a recommendation as defined in Regulation Best Interest adopted by the Securities and Exchange Commission. It is provided to you after you have received Form CRS, Regulation Best Interest disclosure and other materials.

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