Q&A

Q&A: Broker made mistake calculating RMDS

March 2, 2026 By Liz Weston Leave a Comment

Dear Liz: While preparing our 2025 taxes, I noticed that our brokerage doubled the required minimum distributions for my husband and me for 2025. I called, and they said they were “running two systems” and sent a notice to investors to look for any problems. I do not recall ever receiving such a notice. Also, I did not notice the increase, as the bank used for these direct deposits also has multiple CDs, and the account is a “rainy day” fund that we use only for emergencies.

This money moved us into another tax bracket and we will be hit with a big tax bill. Also, we have lost out on future returns from the money that was distributed rather than left alone to grow. What is the brokerage’s responsibility? Do we just have to bite the bullet and pay the taxes on a mistake?

Answer: You had a 60-day window to return the excess withdrawal to your retirement accounts without incurring taxes, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

Assuming that window has passed, you can consider making a claim against the brokerage firm for the higher taxes and lost earnings. Start by making a written complaint to the brokerage firm’s compliance department. If you don’t get satisfactory results, you can file a complaint with the FINRA, the Financial Industry Regulatory Authority, at https://www.finra.org/investors/need-help/file-a-complaint.

Unfortunately, the IRS holds taxpayers responsible for correctly calculating and taking RMDs, even when their brokerage firms make mistakes. You would be wise to put reminders in your calendar to check your brokerage’s calculations as well as the actual distributions while you still have time to correct any errors. You may also want to consider consolidating your finances to make it easier to monitor your accounts.

Q&A: Should I draw down my 401(k) before accepting Social Security?

March 2, 2026 By Liz Weston Leave a Comment

Dear Liz: I am a 66-year-old single male working part-time (not by choice, but it’s the best I can get). I earn about $24,000 per year plus another $4,000 in unemployment during the summer. Work provides healthcare, so I don’t have Medicare premiums yet. With fixed expenses at roughly $50,000 per year, I am withdrawing from my 401(k) to cover the gap until I reach full retirement at the age of 70. If they will let me, I hope to continue to work until 75 because I love my job. At this rate, I will have exhausted the 401(k) by age 70, leaving me with a $100,000 CD earning 4%. Am I right to use the 401(k) as a bridge to full Social Security?

Answer: The advantages of delaying Social Security are typically so great that financial planners often recommend tapping other resources, including retirement funds, if that allows you to put off your application. Social Security’s delayed retirement credits boost your payment by 8% each year between your full retirement age and age 70, when benefits max out. A maxed-out payment is a powerful hedge against longevity risk, which is the danger of living so long that you deplete your savings.

However, a financial planner probably would suggest you also look for ways to decrease your living expenses to avoid completely exhausting your retirement accounts. As you’ve discovered, older people can have a harder time staying employed, even when their health cooperates. You may not be able to work as long as you’d like, and the average Social Security check is closer to $2,000 than the $4,000 or more you would need to meet your fixed expenses.

Consider seeking out a fiduciary financial advisor who can review your situation and offer personalized advice. Your employer or 401(k) provider may offer access to such advisors, or you can look for a financial coach or accredited financial counselor affiliated with the Assn. for Financial Counseling & Planning Education at www.afcpe.org.

Q&A: Could spouse’s early start stunt Social Security survivor benefit?

February 23, 2026 By Liz Weston 4 Comments

Dear Liz: My husband and I plan to delay taking Social Security retirement benefits until the higher-earning spouse is 70. This is to ensure the highest possible survivor benefit. However, the lower-earning spouse will be turning 62 at the same time that the higher earning spouse turns 70. We are concerned that the lower-earning spouse’s future survivor benefit will be reduced if the lower earner starts benefits early. When would be the best time for the lower-earning spouse to take retirement benefits and ensure that the survivor’s benefit remains the same?

Answer: The lower earner won’t reduce the survivor benefit by starting early, but they will permanently reduce their own benefit or any spousal benefit they’re owed. Most people are better off waiting at least until their full retirement age to start Social Security benefits so they can avoid this reduction.

Q&A: How long should I wait before withdrawing from my IRA?

February 23, 2026 By Liz Weston Leave a Comment

Dear Liz: My husband and I disagree over when to use pre-tax monies (e.g., IRAs). He’ll be 69, and I’ll be 67 in the coming year, so we aren’t required to take distributions yet, and he isn’t starting Social Security until 70.

He insists it’s better to use our regular assets to live on and let the IRA monies grow as long as possible. I’d rather save the regular assets (many of which have high capital gains) and leave them to our adult kids after we die.

The pre-tax funds are now $4 million. Now that our kids would have to empty the IRA accounts within 10 years (no more stretch IRAs), doesn’t that make it more reasonable to start using some of those funds now? I’m assuming the IRA balances would still be significant, even after taking required minimum distributions. I’ve gotten most of my IRA funds converted to Roth so we don’t have to take RMDs on that money, but he won’t consider conversions. Is he right about limiting our expenditures to money from the regular brokerage account? Once we start Social Security and RMDs, we’ll have to pay more taxes on any withdrawals compared to now.

Answer: A lot of savers got the message pounded into their heads that retirement accounts should be left to grow tax-deferred as long as possible. The idea was that you’d be in a lower tax bracket when you retired and were finally forced to start withdrawals. You could leave any remaining retirement money to your children and they could continue benefiting from tax deferral by extending distributions over their lifetimes.

As you note, this “stretch IRA” option is no longer available for most non-spouse beneficiaries, who must empty inherited retirement accounts within 10 years. Plus, good savers like you and your husband often face a higher tax bracket, not a lower one, when required minimum distributions begin. That further weakens the argument for delaying withdrawals as long as possible. Also, large-enough RMDs can raise your Medicare premiums and make more of your Social Security income taxable, compounding the overall cost.

From your heirs’ point of view, inheriting your Roth IRA or regular assets is a much better deal than inheriting a pre-tax IRA. Every withdrawal from the pre-tax IRA will be subject to income taxes. Not so the Roth, which offers tax-free withdrawals. Regular assets will get a new, stepped-up value at death so that no capital gains taxes will be due on the appreciation that occurred in the original owner’s lifetime.

You have a few years to make adjustments before you’re locked into RMDs. Roth conversions are one possibility, as are “proactive” withdrawals — starting distributions from your IRAs before they’re required. Additional options to explore include qualified charitable distributions (direct transfers from your IRA to a charity) and qualified longevity annuity contracts, which can provide a lifetime stream of income starting at age 85.

You’d be wise to consult a tax pro who can model different scenarios to figure out the best approach for your situation.

Q&A: Seniors may not have to file tax returns

February 17, 2026 By Liz Weston 1 Comment

Dear Liz: I disagree with the tax advice you gave to the 85-year-old lady and her husband, age 87, who hadn’t filed a tax return in the last three to five years. Maybe their combined income is so low they don’t have to file. Did you consider that? If not, you should. Not everyone needs a tax adviser to add two Social Security income forms together and determine that, “No, hon, we don’t have to file.”

Answer: That was actually my first thought. But the fact that the writer said her spouse hadn’t “paid” their income tax in several years indicates they may have owed taxes prior to that point, and that filing tax returns had been routine.

Many people in their 80s don’t have to file federal tax returns because their income is too low. For the 2025 tax year, singles 65 and over with gross incomes under $15,750 don’t need to file. The limit is $31,500 if one member of a married couple is 65 or older and $34,700 if both spouses are 65 or older.

But it would be dangerous and irresponsible to assume that just because someone is older, they no longer owe taxes. The free Tax-Aide service mentioned in the previous column can assess the couple’s situation and provide reassurance if they don’t need to file or help if they do.