To withdraw, or not withdraw, from Tax-Deferred Accounts

Conventional wisdom provides that it’s usually better to sell long-term non-qualified investments instead of removing money from qualified tax-deferred accounts because long term capital gains taxation is generally lower.  However, conventional wisdom may not create the best after-tax income and wealth.  Instead, it may be better to use a tax-efficient withdrawal plan which takes into consideration the fact that required minimum distributions will be greatly inflated and thus reduce tax efficiency and wealth if retirement savers wait until age 70 ½ before taking qualified distributions.  As such, withdrawing money from qualified accounts could force you into a higher tax bracket, due to the large required minimum distributions.

Before you fall for conventional wisdom, take a moment to learn more about the theory behind tax-efficient withdrawal plans by visiting here or here.

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