A rule of thumb related to retirement planning is that it’s smart to delay taking distributions from a tax-deferred retirement plan as long as possible. Inevitably, though, qualified retirement plan distributions become mandatory upon the plan owner turning age 701/2. When that occurs, the plan owner must start taking distributions from the retirement plan and pay income taxes on those distributions, whether they need the distributions or not. These distributions are known as required minimum distributions and reflect the minimum amount that the average account owner will need to withdraw every year so that their retirement plan is empty when they die.
But some account owners don’t need the additional income, and reporting extra income on their income tax return can have adverse affects on other areas of the tax return, for instance increasing Medicare premiums or increasing the taxability of Social Security benefits.
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