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Turning 60 marks a major shift in your financial life, especially if you've built up savings in a traditional IRA or 401(k). The good news? You can now start taking withdrawals from these accounts without facing the 10% early withdrawal penalty. But before you start pulling out funds, it's critical to understand the tax consequences, timing rules and withdrawal strategies that will shape your financial future in retirement.

What Changes at 59½ and What Doesn't

Once you hit the age of 59½, you're allowed to take distributions from your traditional IRA without triggering the early withdrawal penalty. However, those withdrawals are still taxed as ordinary income. Taking out large sums all at once can push you into a higher tax bracket and even increase your Medicare premiums once you turn 65.

If you don’t need the money yet, you’re not required to take anything out until the age of 73 or 75, depending on your birth year. That’s when Required Minimum Distributions (RMDs) kick in. These RMDs are mandatory, and missing one can lead to a hefty penalty — 25% of the amount you were supposed to withdraw.

Withdrawals Aren't One-Size-Fits-All

There are several ways to approach IRA withdrawals, and the right strategy for you depends on your lifestyle needs, tax situation and investment goals.

Some retirees opt for regular scheduled distributions, treating their IRA like a paycheck. This can help with budgeting and make income more predictable, but you’ll need to watch for inflation and adjust the amount periodically to maintain your purchasing power.

Others go the route of a lump sum withdrawal, especially if they have a large one-time expense like paying off a mortgage or medical bills. However, this move can cause a significant tax hit, since the entire amount is treated as taxable income in the year it's withdrawn.

Alternatively, rolling over your 401(k) into a traditional IRA may provide more flexibility. IRAs often offer more investment choices and easier management compared to employer-sponsored plans. But keep in mind, IRAs also come with RMDs and tax consequences when you begin withdrawing.

RMDs Are Coming Even If You Don’t Need the Money

Once you reach the required age — 73 (if born between 1951 and 1959) or 75 (if born in 1960 or later), you must begin taking RMDs. Your first one is due by April 1 of the year after you hit the required age and then by December 31 every year after that.

Even if you don’t need the money, you still have to take it and pay income tax on it.

If you want to keep your investments growing and minimize taxes, one strategy is to reinvest your RMDs into a taxable brokerage account, or consider putting them into a Roth IRA if you have earned income and meet contribution rules. Just know that RMDs themselves can’t be directly converted into Roth IRAs.

Thinking Ahead: Roth Conversions and Reverse Rollovers

A Roth IRA conversion is one smart move to consider. You pay taxes on the converted amount now, but the funds grow tax-free going forward and aren’t subject to RMDs. This move may make sense if your current tax rate is lower than what you expect in the future.

There's also a lesser-known move called the reverse rollover. If you're 55 or older and your employer plan allows it, you can roll IRA funds back into a 401(k), allowing you to take penalty-free withdrawals under the "Rule of 55" if you retire early. It's complex but potentially helpful in early retirement scenarios.

You Can Still Contribute to Your IRA in Retirement

Retirement doesn’t necessarily mean the end of IRA contributions. If you’re earning taxable income — even from part-time work — you can continue to contribute. For 2025, the limit is $7,000 annually, or $8,000 if you’re over 50. The same income limits apply for Roth IRA contributions.

Don’t Do It Alone

There’s a lot to juggle — tax brackets, RMDs, Medicare premiums and investment risks — and it can get overwhelming fast. This is where a financial advisor can make a big difference. A well-crafted withdrawal plan can help stretch your savings, reduce your tax burden and give you peace of mind as you navigate retirement.

The Bottom Line:

Turning 60 opens the door to your IRA, but how you walk through it matters. Withdrawing smartly could mean the difference between a comfortable retirement and running out of money too soon. Take your time, understand the tax rules and map out a strategy that supports your long-term goals.