It’s time to give the IRS a slice of your retirement cake
It’s time to give the IRS a slice of your retirement cake

THE IRS WISHES TO CELEBRATE YOUR HALF-BIRTHDAY

This invitation is mandatory!

“Woo hoo!  I’m 70 ½, it’s time to start making sure part of my retirement accounts get taxed.” …said no one ever!

Withdrawing monies from your IRAs, 401Ks and all employer sponsored retirement plans (commonly called qualified accounts) is not a voluntary matter.  

The IRS has plans and formulas to make certain you start taking a “required minimum distribution” from your qualified accounts at age 70 ½.  For those born before June 30th, this means the tax year you turn 70.  Those with July 1-December 31 birthdays are actually required to start making withdrawals in the tax year they turn 71.

And, the celebration will continue.  Each individual who owns qualified plans will be subject to the mandatory withdrawal each and every year until they die or run out of money in the account.

Yes, I said “run out of money in the account.”  The formula requires an increasing rate of withdrawal as we age.  It also requires us to withdraw the funds even in a down stock market environment.  These two factors can potentially cripple a portfolio over time.

Failure to make the withdrawal results in a 50% income tax penalty  
of the amount required – as well as income taxation on the entire required withdrawal.  The IRS is serious about this!

There are money factors to consider when making your required minimum withdrawals:

-What qualified account do I withdraw the money from?  Can I take it from one of the accounts or must I take it from each account?

-Will this withdrawal impact the income taxation of my social security?

-How will the withdrawal impact features of the underlying investment it is being taken from?  (i.e. annuity guarantees, Unit Investment Trusts, bond durations, etc.)

-How will this impact my spouse’s potential inheritance and retirement income after I have passed?

The required minimum distribution is not as simple as it appears at face value.

We help retirees navigate these waters every day.  

A sound planning strategy can help you make sound withdrawal choices over time.

For more information on required minimum distributions, click here:

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© 2017 Jane B. Smith, CFP®

This material is for use with the general public and is designed for informational or educational purposes only. It is not intended as tax or investment advice and is not a direct recommendation for your retirement savings. LFS-1843931-071