New retirement withdrawal rule could backfire in costly way

A new law increasing the age you must withdraw from your retirement accounts may come with some unexpected and expensive consequences. Retirement legislation President

Biden inked in December pushes the age that retirees must start taking required minimum distributions, or RMDs, from IRAs, 401(k)s, and 403(b) plans, to 73 this year, up from 72.

That will bump up higher to age 75 in 2033. The delay allows investments to grow tax-free even longer and offers a window to sock more tax-deferred dollars away. But

postponing your RMD may ultimately leave you with larger required annual withdrawals later in life, pushing your income into a higher tax bracket that may affect what you pay in

taxes for Social Security or for your Medicare premiums. It could also become a tax headache for heirs. “The more you push back on the RMD age, the shorter that window to

get all of that money out becomes,” Ed Slott, a certified public accountant in New York and an expert on IRAs, told Yahoo Finance. “And as you stuff more income into a shorter

time period, overall you and your beneficiaries are going to end up paying more in taxes.” RMD rules You can't keep funds in a retirement plan or a traditional IRA

(including SEP and SIMPLE IRAs) indefinitely. Eventually, they must be cashed out and taxed as ordinary income.