When you retire, your IRA doesn’t need to be closed, cashed out, or moved. It stays open under the same federal rules it always followed, and what to do with your IRA after retirement mostly comes down to three things: keep it invested, plan for the required withdrawals that begin at age 73 or 75 for traditional accounts, and manage the taxes on anything you take out. Roth IRAs skip the mandatory withdrawal part entirely during your lifetime.
Keep the Account Open and Housekeep It
Retiring from a job has no effect on your IRA’s legal status. The account remains a tax-advantaged trust under federal law, and as long as you avoid prohibited transactions, it keeps its tax-exempt treatment.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Investments inside keep compounding without a tax bill until money comes out.
A few practical steps matter more once you stop working. Update your mailing address and contact information with the custodian so tax forms and required notices actually reach you. Review your statements at least once a year to check that your holdings still match your risk tolerance, which usually shifts toward preservation with age. If your custodian charges an annual maintenance fee that feels high for your balance, you can move the account to a lower-cost custodian through a direct trustee-to-trustee transfer at any time without a tax event.
If you’re still earning any income from part-time work, consulting, or self-employment, you can keep contributing. For 2026, the contribution limit is $7,500, or $8,600 if you’re 50 or older, and total contributions can’t exceed your taxable compensation for the year.2Internal Revenue Service. IRA Contribution Limits If you file jointly and your spouse doesn’t work, you can also fund a spousal IRA using your earned income, up to the same limits.
Plan for Required Minimum Distributions
The single biggest change after retirement is the federal requirement to start pulling money out of a traditional IRA at a set age. The government gave you the deduction on the way in, and it wants tax revenue while you’re still around to pay it. These required minimum distributions apply across tax-qualified retirement plans.3Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
When Withdrawals Have to Start
Your starting age depends on your birth year. Under the SECURE 2.0 Act, individuals born between 1951 and 1959 must begin RMDs at age 73. If you were born in 1960 or later, the trigger is 75.4Congress.gov. Required Minimum Distribution RMD Rules for Original Account Owners The IRS treats the calendar year you hit that age as your first distribution year.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
You get a one-time grace period on your first RMD: you can delay it until April 1 of the year after you reach the trigger age. This creates a trap. Delay, and you’ll owe two RMDs in the same calendar year, the first by April 1 and the second by December 31. Both count as taxable income that year and can push you into a higher bracket. Every RMD after the first is due by December 31.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Calculating the Amount
The math is straightforward. Take your IRA balance as of December 31 of the prior year and divide it by the life-expectancy factor from the IRS Uniform Lifetime Table for your age this year. At age 75 the divisor is 24.6, so a $500,000 balance produces an RMD of about $20,325. The current Uniform Lifetime Table has been in effect since January 1, 2022. A separate table, the Joint Life and Last Survivor Table, applies if your sole beneficiary is a spouse more than ten years younger than you, and it produces a smaller required amount.
Own more than one traditional IRA? Calculate the RMD for each account separately, then add them together and pull the total from whichever account you choose.6Internal Revenue Service. RMD Comparison Chart IRAs vs Defined Contribution Plans That flexibility lets you draw from the account with the weakest investments or the highest fees rather than trimming across every account.
The Penalty for Coming Up Short
If you don’t take the full RMD, the IRS charges an excise tax of 25% on the amount you should have withdrawn. On a $20,000 shortfall, that’s $5,000 in penalty alone. The rate drops to 10% if you correct the mistake within the correction window, which generally runs through the end of the second tax year after the year the penalty applied.7Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans Fixing it means withdrawing the missed amount and filing the appropriate return. This is one deadline worth marking; the penalty is punishing even at the reduced rate.
Roth IRAs Don’t Have Lifetime RMDs
None of the above applies to a Roth IRA during your lifetime. The statute exempts Roth IRAs from the minimum distribution rules that govern traditional accounts.8GovInfo. 26 USC 408A – Roth IRAs You can leave the money in the account for your entire life and let it grow tax-free.5Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs RMDs do apply to a Roth after the owner’s death, which matters for the person who inherits it.
How Withdrawals Are Taxed
Every dollar out of a traditional IRA is generally taxed as ordinary income, the same as wages. That includes dividends, interest, and capital gains that built up inside the account. The preferential long-term capital gains rate doesn’t apply to IRA distributions, regardless of how long you held the underlying investments.
Your custodian will withhold federal income tax at a default rate of 10% on most distributions unless you file a withholding election choosing a different percentage or opting out entirely.9Internal Revenue Service. Pensions and Annuity Withholding If you opt out, you may need to make quarterly estimated payments to avoid an underpayment penalty at filing time.10Internal Revenue Service. Topic No 557 – Additional Tax on Early Distributions From Traditional and Roth IRAs Many retirees find that setting withholding around 15% to 20% keeps them close to their actual liability.
State income taxes add a second layer. A handful of states have no income tax, and several others partially or fully exempt retirement income. State rates on IRA distributions range from zero to over 13% depending on where you live, which is worth factoring in if you’re considering a move.
Ways to Take Money Out
Custodians typically offer two options. Scheduled periodic payments, monthly or quarterly or annually, create a steady income stream that stands in for a paycheck. Lump-sum withdrawals let you request cash on demand for a large expense, a medical bill, or an emergency. Many retirees do both: a baseline periodic payment for fixed expenses, plus occasional lump sums for the unexpected.
Either way, you’ll complete a distribution request form from your custodian. The fields that matter most are the dollar amount and your withholding election. Getting the withholding percentage right avoids both a surprise bill in April and an interest-free loan to the government all year. If you’re on periodic payments, set the withholding once and revisit it each year.
Qualified Charitable Distributions
If you’re 70½ or older and give to charity anyway, a qualified charitable distribution routes money directly from your traditional IRA to an eligible charity. For 2026, the limit is $111,000 per person.11Internal Revenue Service. Notice 25-67 – 2026 Amounts Relating to Retirement Plans and IRAs The money goes straight from your custodian to the charity and never lands in your bank account.
The advantage is that a QCD counts toward your RMD for the year but stays out of your adjusted gross income. That beats taking the distribution and claiming a charitable deduction, because a lower AGI can reduce Medicare premiums, shrink the taxable portion of Social Security benefits, and preserve eligibility for other income-sensitive breaks. The one strict rule is that the money must go directly to the charity; if it passes through your hands first, the exclusion is lost.
Consider Roth Conversions in Low-Income Years
Converting some of a traditional IRA to a Roth IRA moves money from a tax-deferred account to a tax-free one.12Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs You pay ordinary income tax on the converted amount now, but future growth is tax-free, future withdrawals are tax-free, and Roth IRAs have no lifetime RMDs, so the converted dollars leave the mandatory withdrawal schedule permanently.
The strategy works best in years when your taxable income runs lower than usual, often between the day you stop working and the day Social Security and RMDs begin. Converting just enough to fill your current tax bracket without spilling into the next one is the classic approach. You’ll want cash outside the IRA to pay the conversion tax; using IRA funds to cover the bill defeats much of the point.
One rule catches people off guard. If your traditional IRAs contain both pre-tax and after-tax money, you can’t cherry-pick the after-tax portion for conversion. Every conversion is taxed based on the ratio of pre-tax to after-tax dollars across all your traditional, SEP, and SIMPLE IRAs combined. If 90% of your total IRA balance is pre-tax, 90% of any conversion is taxable, regardless of which account you convert from.
If You’re Retiring Before 59½
Nothing above assumes early retirement. If you stop working before 59½ and pull from a traditional IRA, the withdrawal is subject to an additional 10% tax on top of the ordinary income tax already owed.13Office of the Law Revision Counsel. 26 USC 72 – Annuities and Certain Proceeds of Endowment and Life Insurance Contracts Several exceptions eliminate the penalty, including disability, certain medical expenses above a percentage of AGI, and substantially equal periodic payments under section 72(t).14Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Update Your Beneficiary Form
Your IRA’s beneficiary form, not your will, controls who inherits the account. This is where retirement-era estate mistakes concentrate. People update the will after a divorce or a death in the family and forget the beneficiary form sitting in the custodian’s records. The beneficiary form is a standalone legal document that typically overrides whatever the will says. Name a primary beneficiary and at least one contingent beneficiary in case the primary dies first, and review the form after any major life change.
A surviving spouse has the most flexibility of any beneficiary and can generally roll an inherited IRA into their own, which resets the RMD clock to their age. Most non-spouse beneficiaries must empty an inherited IRA by the end of the tenth year after the original owner’s death.15Internal Revenue Service. Retirement Topics – Beneficiary If you’re considering naming a trust as beneficiary to control how heirs receive the money, the structure has specific technical requirements and its own tax consequences, and it’s an area where professional estate planning advice earns its cost.