📋 What's in This Guide
1. Traditional vs Roth IRA
Both IRA types offer tax advantages, but they work differently. The right choice depends on your current tax rate, expected future tax rate, and whether you anticipate needing the money during retirement.
| Feature | Traditional IRA | Roth IRA |
|---|---|---|
| Tax on contributions | Deductible (if eligible) | After-tax — no deduction |
| Tax on growth | Tax-deferred | Tax-free |
| Tax on withdrawals | Taxed as ordinary income | Tax-free (if qualified) |
| Required Minimum Distributions | Yes — starting at age 73 | No RMDs during owner's lifetime |
| Early withdrawal penalty | 10% before age 59½ (exceptions apply) | 10% on earnings before 59½; contributions always penalty-free |
| Income limits | Deductibility limited by income if covered by workplace plan | Contribution limits phase out at higher incomes |
| Best for | Expect lower tax rate in retirement | Expect same or higher tax rate in retirement |
The honest answer for most retirees: If you already have a large Traditional IRA, your tax situation is largely set. The strategic question now is whether to do Roth conversions — moving money over gradually and paying tax now at known rates before RMDs force larger taxable withdrawals starting at 73.
2. Contribution Limits & Catch-Up Rules
If you're still contributing to an IRA — even in early retirement with part-time income — these are the 2026 limits.
2026 IRA Contribution Limits
- Under age 50: $7,000/year
- Age 50 and older (catch-up): $8,000/year
- Requirement: You must have earned income equal to or greater than your contribution amount
- Spousal IRA: A non-working spouse can contribute up to $8,000/year based on the working spouse's income
Roth IRA Income Limits (2026)
- Single filers: Full contribution allowed up to $150,000 MAGI; phases out between $150,000–$165,000
- Married filing jointly: Full contribution up to $236,000; phases out between $236,000–$246,000
- Above limits? The Backdoor Roth IRA strategy — contributing to a Traditional IRA then converting — remains available for high earners
No Age Limit on Traditional or Roth Contributions
SECURE 2.0 eliminated the age 70½ cap on Traditional IRA contributions. As long as you have earned income — including part-time work in retirement — you can contribute to either a Traditional or Roth IRA at any age.
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3. Rollovers & Transfers
When you leave a job or retire, you have options for what to do with your 401(k) or other employer plan. Understanding the difference between a rollover and a transfer prevents costly mistakes.
Direct Rollover (Trustee-to-Trustee) — Always Preferred
Money moves directly from your old 401(k) custodian to your IRA custodian. No taxes withheld, no 60-day deadline, no risk of missing the window. This is the cleanest method and should be your default approach.
Indirect Rollover — Use with Caution
The check is sent to you personally. Your employer is required to withhold 20% for taxes.[2] You must deposit the full original amount (including the withheld 20% from your own funds) into your IRA within 60 days — or the withheld amount is treated as a taxable distribution. You get the 20% back at tax time, but missing the 60-day window is an expensive mistake.
Rollover Rules to Know
- You can only do one indirect IRA-to-IRA rollover per 12-month period (per person, not per account)
- Direct trustee-to-trustee transfers are unlimited — no 12-month restriction applies
- Roth 401(k) should roll into a Roth IRA — rolling into a Traditional IRA creates a taxable event
- After-tax 401(k) contributions can often be rolled directly into a Roth IRA tax-free
4. Required Minimum Distributions (RMDs)
Once you reach age 73, the IRS requires you to withdraw a minimum amount[1] from your Traditional IRAs and most other tax-deferred retirement accounts each year. This is the government recouping taxes on money that's been growing tax-deferred for decades.
RMD Key Facts
- Starting age: 73 (raised from 72 by SECURE 2.0; will increase to 75 in 2033)
- First RMD deadline: April 1 of the year after you turn 73 — but taking it in that calendar year avoids having two RMDs in one tax year
- Accounts subject to RMDs: Traditional IRAs, SEP IRAs, SIMPLE IRAs, most 401(k)s, 403(b)s, and 457(b)s
- Accounts NOT subject: Roth IRAs (during owner's lifetime), Roth 401(k)s after 2024
- Penalty for missing RMD: 25% of the amount not withdrawn (reduced to 10% if corrected within 2 years)
How Your RMD Is Calculated
Formula: Your IRA balance on December 31 of the prior year ÷ your IRS Life Expectancy Factor for your age
Example: $350,000 balance ÷ 26.5 (age 73 factor) = $13,208 RMD for the year (~$1,101/month if taken monthly)
You can always withdraw more than your RMD. You just cannot withdraw less without penalty.
Important: Aggregate Rule for Multiple IRAs
If you have multiple Traditional IRAs, calculate the RMD for each account separately, but you can satisfy the total from any one IRA or combination. However, 401(k) RMDs must be taken from each 401(k) separately — you cannot aggregate across plans or pull from an IRA to satisfy a 401(k) RMD.
5. RMD Life Expectancy Factors (IRS Uniform Table)
These are the IRS Uniform Lifetime Table factors used by most retirees. Use your age in the year the distribution is taken, and your account balance as of December 31 of the prior year.
| Age | Life Expectancy Factor | % of Account Withdrawn |
|---|---|---|
| 73 | 26.5 | 3.77% |
| 74 | 25.5 | 3.92% |
| 75 | 24.6 | 4.07% |
| 76 | 23.7 | 4.22% |
| 77 | 22.9 | 4.37% |
| 78 | 22.0 | 4.55% |
| 79 | 21.1 | 4.74% |
| 80 | 20.2 | 4.95% |
| 82 | 18.5 | 5.41% |
| 85 | 16.0 | 6.25% |
| 90 | 12.2 | 8.20% |
Use the IRS RMD worksheet or the official tables in IRS Publication 590-B for the complete factor table and special rules for spouses more than 10 years younger.
6. Roth Conversion Strategy
A Roth conversion moves money from a Traditional IRA to a Roth IRA. You pay ordinary income tax on the amount converted in that year, but all future growth and withdrawals from the Roth are tax-free.
When Roth Conversions Make Sense
- Your income is lower than it will be after RMDs begin at 73
- You're in a year where your tax bracket is unusually low (large deductions, loss years)
- You have non-IRA money to pay the tax bill — converting and paying taxes from the IRA itself reduces the benefit
- You want to reduce future RMDs and leave tax-free assets to heirs
- You expect tax rates to rise in the future
The Roth Conversion Window — Ages 63 to 72
For many retirees, the years between retirement and the start of RMDs at 73 are the lowest-income years of their life. Social Security may not have started yet (or may be partially delayed). This creates a window to convert Traditional IRA funds to Roth at a lower tax cost. Even partial conversions — filling up your current tax bracket each year — can meaningfully reduce your future RMD burden.
IRMAA caution: Roth conversions increase your MAGI, which can trigger or increase Medicare IRMAA surcharges two years later. If you're near an IRMAA threshold, model the impact carefully before converting a large amount in a single year. Sometimes spreading the conversion over multiple years is better than one large conversion.
7. Qualified Charitable Distributions (QCDs)
If you're 70½ or older and charitably inclined, a QCD is one of the most tax-efficient moves available to you. It allows you to send money directly from your IRA to a qualified charity — and that amount counts toward your RMD but is never included in your taxable income.
QCD Rules (2026)
- Eligible age: 70½ or older
- Annual limit: Up to $108,000 per person (indexed for inflation)
- Eligible accounts: Traditional IRAs only — not 401(k)s or other employer plans
- Must go directly: The check must be written to the charity, not to you — if it comes to you first, it does not qualify as a QCD
- Eligible charities: 501(c)(3) public charities — not donor-advised funds, supporting organizations, or private foundations
Why a QCD Often Beats a Charitable Deduction
Most retirees take the standard deduction and get no benefit from itemizing charitable gifts. A QCD bypasses this — the excluded income never appears on your return at all, which also means it won't increase your MAGI, trigger IRMAA surcharges, or affect the taxation of your Social Security benefits. It's a direct tax reduction, not just a deduction.
8. SECURE 2.0 Key Changes
The SECURE 2.0 Act (signed December 2022) made significant changes to retirement account rules. Here are the ones most relevant to retirees and near-retirees in 2026.
Changes Already In Effect
- RMD age raised to 73 — effective for anyone turning 73 in 2023 or later
- RMD age rises to 75 in 2033 — if you're younger, you'll get an even longer tax-deferred growth window
- No RMDs on Roth 401(k)s — starting 2024, Roth 401(k)s align with Roth IRAs and have no RMD requirement during the owner's lifetime
- Reduced RMD penalty — from 50% to 25%, further reduced to 10% if corrected within 2 years
- QCD limit indexed to inflation — the $108,000 (2026) limit now adjusts annually
- Employer emergency accounts — companies can now offer penalty-free emergency withdrawal provisions
Enhanced Catch-Up Contributions (Starting 2025)
- Ages 60–63 can now make super catch-up contributions to 401(k) plans — up to $11,250 extra above the standard limit
- IRA catch-up contributions ($1,000 extra for age 50+) will now be indexed to inflation annually
- These changes benefit those still working in early retirement more than fully retired individuals
9. Inherited IRA Rules (SECURE Act)
If you've inherited an IRA — or are planning your estate — the rules changed significantly after the original SECURE Act (2019). Most non-spouse beneficiaries now face a 10-year rule instead of lifetime "stretch" distributions.
The 10-Year Rule for Most Beneficiaries
Non-spouse beneficiaries who inherited an IRA from someone who died in 2020 or later generally must empty the account within 10 years of the original owner's death. There are no mandatory annual distributions during the 10 years — but the full balance must be out by December 31 of year 10.
Exceptions — Who Can Still Stretch Distributions
- Surviving spouses — can treat the inherited IRA as their own, roll it over, or use the old stretch rules
- Minor children of the deceased — can stretch until age 21, then 10-year rule kicks in
- Disabled or chronically ill beneficiaries — may qualify for lifetime stretch distributions
- Beneficiaries not more than 10 years younger — can use their own life expectancy
Estate planning note: The 10-year rule can create significant tax bunching for your heirs if they're in their peak earning years. A properly drafted trust, Roth conversion before death, or naming a younger beneficiary strategically can help. This is worth discussing with an estate planning attorney.
10. Qualified Longevity Annuity Contracts (QLACs)
A QLAC is a niche but genuinely useful tool that ties directly to the RMD rules covered above. In plain terms, it's a deferred annuity you buy inside a Traditional IRA or 401(k): you hand an insurance company a lump sum now, and in return they guarantee you a monthly income for life starting at a future age you choose — as late as 85.
Think of it as buying more of the kind of guaranteed, can't-outlive-it income that Social Security already gives you — aimed squarely at the far end of retirement.
Why retirees consider one
Longevity insurance. If you live a long life, the income kicks in exactly when you're most likely to need it — your 80s and beyond — and keeps paying for as long as you live. It's protection against outliving your savings, with no market risk.
Lower RMDs in the meantime. Money you move into a QLAC is set aside from your RMD calculation until the payments begin. That can reduce your required withdrawals — and your taxable income — in the years before payouts start, which may also ease taxes on Social Security and your Medicare premiums.
The honest trade-offs
- The money is locked up. Once it's in, you generally can't pull it back out as a lump sum.
- It's a longevity bet. If you don't live long, you may receive less than you put in — unless you add a spousal or death benefit, which lowers the monthly payout.
- Usually no inflation protection unless you pay extra for an inflation rider.
The 2026 limits
Under the SECURE 2.0 changes, the old "25% of your balance" cap was removed. As of 2026, you can put up to $210,000 per person (a lifetime limit, indexed for inflation) into QLACs across your retirement accounts — so a married couple could potentially shelter up to $420,000. Payouts must begin no later than age 85.
Who it actually fits
A QLAC isn't for everyone. It tends to make sense for someone who expects a long life, wants guaranteed late-retirement income with no market risk, and doesn't need that chunk of money to stay liquid. If your savings are modest, or you may need access to those funds, it's often not the right tool.
This is educational only, not financial advice. QLACs are insurance products with important fine print, and the rules and limits change. Talk with a licensed, fee-only financial advisor before deciding whether one fits your situation.
11. Official IRS Resources
🏛️IRS — Required Minimum Distributions FAQ→ 📄IRS Publication 590-B — Distributions from IRAs (Full RMD Tables)→ 📋IRS — RMD Rules and Life Expectancy Factors→ 🏛️IRS — Roth IRAs: Contributions, Conversions, and Withdrawals→ 🏛️Social Security Administration — Retirement Benefits→Want professional-grade tools? If you actively manage your own investments, Morningstar Investor offers independent research, portfolio X-ray, and fund analysis used by serious DIY investors.
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