Craig Wear, CFP® explains a "tax trap" affecting IRA millionaires: long-term tax-deferred growth of IRAs can create a large future tax burden driven by required minimum distributions (RMDs), which under current law begin at age 73, and by increased taxable income that can push retirees into higher tax brackets and raise taxation on Social Security benefits.
Age 73.
First, let's talk about what the what the problem is. In my first book, I call it a tax trap. So this tax trap for IRA millionaires is really down to the fact that IRAs grow tax deferred over a long period of time. But then they create this tax trap bomb through a few things. One is required minimum distributions that under current law have to start at age 73. The second is through the increased taxable income that keeps pushing retirees potentially into higher tax brackets. Also, a lot of times for some people, there's taxation that happens on your Social Security benefits that is greater because you have these RMDs coming in at these higher levels.
