00:00the core downside withdrawals before age 59 and a half trigger a 10 penalty plus ordinary income
00:07tax on the withdrawn amount and you're forced to start taking required minimum distributions
00:11rmds at age 73 whether you need the money or not withdrawing before then without a qualifying
00:19reason means paying income taxes plus a 10 early withdrawal penalty and rmds begin at age 73.
00:26missing an rmd deadline is costly the penalty equals 25 of the amount not withdrawn though it drops to
00:3410 if corrected within two years fidelity key structural downsides ranked by impact forced
00:41withdrawals and retirement rmds mean you can't let the account grow tax deferred indefinitely
00:47unlike a roth ira which has no rmd requirement this can push you into a higher tax bracket in
00:53years you don't need the income vanguard illiquidity penalty the 10 early withdrawal charge applies
01:00broadly early withdrawals before 59 and a half are typically subject to this 10 penalty with only
01:07narrow exceptions first home purchase disability vanguard tax bill uncertainty because contributions
01:14are pre-tax you're deferring the tax rate question to a future you don't control if rates rise or your
01:21income is unexpectedly high later the deferred tax hit can exceed what you'd have paid up front
01:26contribution ceiling for 2026 the limit is seven thousand five hundred dollars under age 50
01:32eight thousand six hundred dollars for those 50 or older capping how much tax advantage space you get
01:39annually compared to a 401k fidelity this changes by context near retirement individuals with lower
01:46future income brackets often benefit from the deferral despite rmds younger lower income earners
01:53frequently come out ahead with a roth instead all figures here are u.s specific irs rules other
02:00countries retirement accounts follow entirely different structures and i don't have your location
02:05practical step if your early career or expect higher future income compare a roth ira against the
02:11traditional before committing since the rmd and early withdrawal constraints are the traditional ira's
02:17main structural weaknesses finally remember that everything we discussed today is for educational
02:23purposes only and does not constitute financial advice good luck to everyone and see you in the next video
