Individuals who own IRA’s, 401K’s, 403b’s and other ERISA qualified retirement accounts are subject to the Required Minimum Distribution rules.
As required by law, specified amounts must be withdrawn from these accounts and reported as taxable income. Failure to make the withdrawals results in a 50% penalty imposed by the IRS and 100% of the required withdrawal is fully taxed.
For those born June 30, 1947 and earlier the deadline for withdrawals is December 31, 2017.
Those who were born July 1, 1947 – June 30, 1948 will be subject to the rule beginning in tax year 2018.
The age the minimum withdrawal requirement begins is the calendar year in which you turn age 70 ½. Withdrawals are required each subsequent year. They must continue until the account is depleted or at death – whichever comes first.
The amounts withdrawn are based on an accelerating formula. Therefore, each year the withdrawal gets larger.
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Copyright © 2017 – Jane B. Smith, CFP®. All rights reserved.