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Ira Distributions Deadline For Seniors
Copyright © 2005, Daniel Lamaute
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IRA investors who reached age 70 ½ last year should begin taking
a Required Minimum Distribution (RMD) from their accounts by
April 1, this year to avoid being subject to a hefty 50% tax
penalty.
The IRS requires most people who turn 70 ½ to begin withdrawing a
minimum amount every year from their IRAs and other tax deferred
retirement accounts. You have until April 1 of the year
following the year you turn 70 1/2 to start taking your RMD.
It can be costly if you don’t follow the IRS requirements for
taking the RMDs. You could be charged a 50% federal tax penalty
on the RMD amounts that you should have received in addition to
any income tax you might owe on the RMD.
The RMD do not apply to Roth IRAs, unless they’re inherited. If
you own several IRAs, you can elect to take an RMD for each of
your IRAs, or take the total RMDs from one or more account.
Luckily, most financial firms with custody of your retirement
accounts will automatically calculate your RMD for you and send
you a distribution check. However, problems sometimes occur if
your date of birth on file is not accurate or if you have moved
and have not notified your IRA custodian(s) of your latest
mailing address. In any case, you are the one responsible for
meeting the RMD requirements.
Now, may be a good time for mature investors to look into
consolidating some of their retirement accounts, as a way to
simplify their record keeping and keep things from falling thru
the cracks, according to retirement plan experts at Lamaute
Capital, Inc. (www.investsafe.com).
Your RMD amount is calculated by dividing your December 31
account value by your life expectancy factor as given in an IRS
Uniform Table. If your spouse is more than 10 years younger than
you and is your sole beneficiary, you can reduce the amount of
your RMD. Use the Joint Life Expectancy Table (Table II) that can
be found in IRS Publication 590.
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Writer's Resource Box:
Daniel Lamaute of Lamaute Capital, Inc.,
Lamaute Capital (http://www.investsafe.com) specializes in
retirement plans and methods to minimize tax penalties on early
withdrawals. Tax laws and regulations are complex and subject to
change. Lamaute Capital does not provide tax advice. Please
consult an attorney or tax advisor about your particular
situation.
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The article on this page is Copyright © 2005, Daniel Lamaute
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