Congratulations! You’ve lived long enough to retire or you’re almost there.But before you “cash out” and get your money via distributions from your retirement account, you may want to know what some people learn the hard way.Let’s start with distributions from traditional IRAs and 401(k)s. The first five questions will relate to these traditional accounts. If you have either a Roth account (IRA or 401k), you can skip to number 6 on the list below.And whether you’re getting ready to retire or you have a long way to go, the information below can benefit everyone.Traditional IRA and 401k Accounts1. Early Withdrawal Penalty.A distribution from your traditional IRA or 401k before you reach the age of 59 1/2 will cause a 10% early withdrawal penalty on the money distributed. And yes, you’re paying taxes too, so you’re losing a big chunk of money if you withdrawal early.Let’s say you take a $5,000 distribution from your traditional IRA at age 50. You will be subject to a $500 penalty and you will also receive a 1099-R from your IRA custodian. You will then need to report $5000 of income on your tax returns.Long story short: Don’t withdraw early unless you really need the money.2. Required Minimum Distributions (RMD).But whether you need the money or not, at age 70 1/2, your friends at the IRS will force you to begin taking distributions from your retirement account. Unless you’re still employed.Your distributions will be subject to tax and you will also receive a 1099-R of the amount of money distributed which will be included on your tax return. The amount of your distribution is based on your age and your account’s value.For example, if you have a $150k IRA & you’ve just hit the age of 70 1/2, your first RMD would be $5,685 (3.79% of $150k).3. Don’t Take Large Distributions In One Year.Unfortunately, money from your traditional retirement account is subject to tax at the time of distribution. With this in mind, it would be wise of you to be careful about how much money you take out in one year. Why? Because a large distribution can push your distribution income and your other income into a higher tax bracket.Let’s say you have employment or rental/investment income of $100,000 yearly. That would mean you’re in a joint income tax bracket of 15% on additional income.However, if you take $100,000 as a lump sum that year this will push your annual income to $150K and you will be in a 28% income tax bracket.If you chose to instead break up that $100K over two years, then you could stay in the 15% to 25% tax bracket. This way, you reduce your overall tax liability.Long story short: When it comes time for you to start enjoying retirement, don’t take out too much money or the IRS will be enjoying it instead.4. Distribution Withholding.Most distributions from an employer 401k or pension plan will be subject to a 20% withholding, unless you’re at the age of 59 1/2. This withholding will be sent to your friends at the IRS in anticipation of tax and penalty that will be owed.In the case of an early distribution from your IRA, a 10% withholding for the penalty amount can be made.5. If You Ever Have Tax Losses Consider Converting to a Roth IRA.Roth IRAs are popular for a reason. When you have tax losses on your tax return, you may want to consider using those losses to offset income that would arise when you convert a traditional IRA or 401k to a Roth account.When you convert a traditional account to a Roth account, you pay tax on the amount of the conversion. This is usually worth it, because you’ll have a Roth account that grows entirely tax free which you won’t pay taxes on when you distribute the money.Interesting fact: Some tax savvy people use tax losses so that they end up paying less in taxes later on.Tips For Roth IRAs and Roth 401(k)s6. Roth IRAs Are Exempt from RMD. It’s amazing right? While traditional IRA owners must take required minimum distributions (RMD) when they reach the age of 70 1/2, Roth IRAs are exempt from RMD rules. This allows you to keep your money invested for as long as you wish.7. “Designated” Roth 401ks Must Take RMD.Yea, tax code can be confusing. “Designated” Roth 401k accounts are subject to RMD. These kinds of Roth accounts are part of a 401k/employer plan, which is where the word “designated” comes from.Anyway, so how do you avoid this you may ask? By rolling your Roth 401k funds over to a Roth IRA when you reach the age of 70 1/2.8. Distributions of Contributions Are Always Tax Free (Unless The Government Changes That)Unless the government makes major changes, distributions of contributions to a Roth IRA are always tax-free. No matter your age, you can always take a distribution of your Roth IRA contributions without penalty or tax.9. Tax-Free Distributions of Roth IRA Earnings.However, in order to take a tax free distribution from your Roth IRA, you must be age 59 1/2 or older and you must have had your Roth IRA for five years or longer. As long as those two criteria are met, all amounts (contributions and earnings) may be distributed from your Roth IRA tax free.Note: If your funds in the Roth IRA are from a conversion, then you must have converted the funds at least 5 years ago and must be 59 1/2 or older in order to take a tax-free distribution.10. Delay Your Roth Distributions.Don’t be so quick to use the funds in your Roth account. It’s usually better to distribute and use other funds and assets that are at your disposal. Why? Because those funds aren’t as tax efficient while invested.Long story short: Roth retirement accounts are the most tax efficient way to earn income in the U.S if you use them right. Learn even more from our other article on the lesser-known benefits of Roth accounts.That’s all folks. As always, if you have any questions, please don’t hesitate to ask in the comments below.