Posted on 12/28/2016 3:01:42 PM PST by Libloather
Nearly a third of retirees are playing chicken with one of the steepest tax penalties out there — and they are running out of time.
IRS rules on so-called required minimum distributions generally kick in once you reach age 70½. For 401(k)s and other defined contribution plans, it's either when you turn 70½. or you retire, whichever is later. If you've inherited an IRA, you might also be subject to RMDs, even if your own retirement is years away.
How much you need to take is usually based on the account balance at the end of the previous year, and your life expectancy based on your age. Fail to withdraw enough, and there's a 50 percent penalty on the shortfall.
(Excerpt) Read more at msn.com ...
Self directed my monies...since my late 30's....
The rule reflects the law at code section 401 which was passed by congress in 1974.
No, it isn’t a tax on already taxed savings. None of the funds in a 401k have been taxed. A 401k is funded by pre-tax income and grows without taxation.
The failure to take a RMD precipitates a penalty. Penalties are not taxes.
The funds withdrawn from the 401k are treated as income and are taxed as such. But, these funds have not been taxed before.
In general if your tax rates are lower during retirement, you lost on not using a deferral. However some investments other than retirement accounts provide tax deferral like holding stocks for ever, real estate, .
“...the brokerage just automatically sends me a check every November...”
Same thing for my wife from her mom’s account but it just showed up last week. One year they forgot to do it until January. That was a mess. Even though I now use a CPA, I still hate tax time just for gathering records.
You have to take it out of the IRA but you can still invest it outside of your IRA. It won’t be tax deferred but it can still work for you.
Bookmarked.
I’ve learned a lot tonight.
I’ve been an advisor for 25 yrs, large clientele. I have worked for some of the biggest banks and brokers in my career. I have never seen or heard of anyone paying this fine
In fact, the law changed as well. Now it must be willful
Most freepers know as much about finance as I know about farming on mars.
I inherited my mother’s IRA in 2010. Because she was over 70-1/2 and was taking her RMD, I must also take that distribution even though I was only 60 when she died. I moved the money to my own funds and they send me a check once a year.
Excellent
I stand corrected.
Is there a better way to shield untaxed money ?
Does not paying the fine cause the penalty to grow ?
Trump needs to instruct the attorney general to check all laws in the federal books, particularly those made during and after the FDR Administration, to make sure that they are reasonably justified under one of Congress’s constitutionally enumerated powers, particularly the powers listed in Section 8 of Article I.
Any federal laws which cannot be reasonably constitutionally justified need to be taken out of the books imo.
Regardless what FDR’s state sovereignty-ignoring activist justices wanted everybody to think about the scope of Congress’s Commerce Clause powers (1.8.3) for example, please consider the following.
Thomas Jefferson, and previous generations of state sovereignty-respecting justices, had clarified that the states have never delegated to the feds, expressly via the Constitution, the specific powers to regulate INTRAstate banking, INTRAstate commerce, or contracts, regardless if the parties involved in the contract are domeciled in different states.
“A proposition was made to them to authorize Congress to open canals, and an amendatory one to empower them to incorporate. But the whole was rejected, and one of the reasons for rejection urged in debate was, that then they would have a power to erect a bank, which would render the great cities, where there were prejudices and jealousies on the subject, adverse to the reception of the Constitution [emphasis added].” —Jefferson’s Opinion on the Constitutionality of a National Bank : 1791.
“Congress is not empowered to tax for those purposes which are within the exclusive province of the States.” —Justice John Marshall, Gibbons v. Ogden, 1824.” —Gibbons v. Ogden, 1824.
”State inspection laws, health laws, and laws for regulating the internal commerce of a State, and those which respect turnpike roads, ferries, &c. are not within the power granted to Congress [emphases added].” —Gibbons v. Ogden, 1824.
"4. The issuing of a policy of insurance is not a transaction of commerce within the meaning of the latter of the two clauses, even though the parties be domiciled in different States, but is a simple contract [emphasis added] of indemnity against loss." - Paul v. Virginia, 1869. (The corrupt feds have no Commerce Clause (1.8.3) power to regulate insurance.)
In fact, Congress has based things like Social Security on the General Welfare Clause (GWC; 1.8.1), evidenced by Helvering v. Davis. But the problem with Congress justifying anything with the GWC is this. President James Madison had vetoed Congress’s public works bill of 1817, noting the following in the constitutionally required veto explanation.
The GWC was not intended to be an express delegation of power as the 14th Congress had wrongly interpreted it, but merely an introductory clause for the clauses that followed it in Section 8, those clauses intended to be understood as express delegations of power.
”To refer the power in question to the clause "to provide for common defense and general welfare" would be contrary to the established and consistent rules of interpretation, as rendering the special and careful enumeration of powers which follow the clause nugatory and improper. Such a view of the Constitution would have the effect of giving to Congress a general power of legislation instead of the defined and limited one hitherto understood to belong to them, the terms "common defense and general welfare" embracing every object and act within the purview of a legislative trust.” —James Madison, Veto of federal public works bill, 1817
Trump has his work cut out in peacefully “forcing” the corrupt federal government to surrender state powers that it has stolen from the states back to the states.
”From the accepted doctrine that the United States is a government of delegated powers, it follows that those not expressly granted, or reasonably to be implied from such as are conferred, are reserved to the states, or to the people. To forestall any suggestion to the contrary, the Tenth Amendment was adopted. The same proposition, otherwise stated, is that powers not granted are prohibited [emphasis added].” —United States v. Butler, 1936.
As mentioned in previous post, if Trump can put a stop to unconstitutional federal taxes, then the states are probably going to find a tsunami of new revenues that they won’t know what to do with.
I inherited my brothers IRA which is Apple stock. My Edward Jones advisor lets me know the amount that needs to be drawn. Usually in November we transfer the required shares of stock to my personal account. Doing this we do not have to sell any of the stock. Thank you Waco!
Roll your IRA over into bank stock, or some kind of stock where it might earn dividends. IRAs just don’t gain much. Our best retirement earnings have been Wal-Mart stock. We sometimes sell off a partial amount so the tax won’t eat us alive.
Roll your IRA over into bank stock, or some kind of stock where it might earn dividends. IRAs just don’t gain much. Our best retirement earnings have been Wal-Mart stock. We sometimes sell off a partial amount so the tax won’t eat us alive.
Fake news! I KNEW it!
Everyone takes the money out. Financial institutions watch it like a hawk. Msn or whomever write stories like this to fill up space.
I know two now-retired former co-workers who failed to take the appropriate RMD, out of ignorance not willful evasion. They both received a stern letter from the IRS that got their full attention. So, you’re correct, most likely very few people ever pay the penalty since the IRS gives them a window of opportunity to comply.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.