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 ...
>Yet another fine reason to abolish the IRS.
IRS? How ‘bout govt out of the ‘investing’/’savings’/IRA/etc. all together.
Talk about a perversion of politics: Coming, or going, they’re going to take a chunk out of your ass. Long over due getting ‘em out of our wallets\bank accounts.
IRS rules ???
The Founding States not only gave the power to appropriate taxes uniquely to the House of Representatives (1.7.1), but had appropriately allowed tax-paying citizens to vote only for representatives (1.2.1), not senators or presidents.
So patriots need to work with Trump to make sure that the corrupt, post-17th Amendment ratification Congress starts taking responsibility for federal tax laws and regulations instead of hiding behind non-elected federal bureaucrats who do Congress’s dirty appropriations work for it. (Hopefully this “party” will end under Trump’s watch.)
Corrupt Congress is wrongly letting the IRS get away with oppressing taxpayers with unpopular and unconstitutional tax laws, laws that Congress cannot justify under its constitutional Article I, Section 8-limited powers.
“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.
And it so happens that the tax issues mentioned in the OP having nothing to do with those Section 8-limited powers imo.
Consider that corrupt lawmakers hiding behind non-elected, regulation-making bureaucrats has arguably helped to foster so-called “career” lawmakers.
Patriots need to support Trump in putting a stop to unconstitutional federal taxes. After such taxes are stopped, the individual states would probably find a tsunami of new revenues that they wouldn’t know what to do with.
More hoops through which to jump just to be “allowed” to keep that which citizens have earned...
Taxes, taxes upon taxes, penalties, penalties with interest, fees, permits, certifications, inspections, the list seems endless. All created “to keep us safe”, LOL.
The election of DJT is the citizenry’s giant middle finger to the Legal Mafia, also known as the Federal Gov’t.
>>Patriots need to support Trump in putting a stop to unconstitutional federal taxes. After such taxes are stopped, the individual states would probably find a tsunami of new revenues that they wouldn’t know what to do with.
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True!
“You got to defer taxes for all those years you contributed and until you retire. Usually you are in a lower tax bracket after retirement when you start paying taxes on your withdrawals.”
1. You get no tax breaks you would ordinarily get: capital gains, depreciation, etc.. And turns it all into ordinary income that is taxed at the highest rates when you withdraw it, instead of at the lowest tax rates.
2. You face government control and limits as to what investments you are allowed to choose, when you have access to your own money, penalties for withdraw, etc.
3. The government is your partner and shares your gains.
4. The balance is not yours. Part of it belongs to the government.
5. You have to plan on being poorer in retirement to be in a lower tax bracket.
That’s a start on listing why an IRA is a bad deal.
Took advantage for the first time this year of QCD - Qualified Charitable Distribution - for wife’s IRS - allows direct transfer of distribution from the IRS host to a qualified charity - amount distributed counts toward the MRD but can be reported on tax return as a tax free distribution, thus avoiding federal income tax on that amount - since we were going to make a sizable contribution to the church anyway, this permits some tax advantage even if we don’t eventually donate enough over all to take an itemized deduction for charitable giving.....
Are you from the gubmint?
H*ll NO. We working people are already taxed to death! (no pun intended)
A tax on top of the tax you already paid and if you don’t take your money out when they tell you they will tax you even more.
What a f##ked up system we have. FU IRS!
Thank you. Although that acronym was in the article, I do not recall what the EJ rep told me. Guess that must be it, huh?
I inherited an IRA from my dad - the brokerage just automatically sends me a check every November for whatever they calculate my RMD to be for the year.
The Required Minimum Distribution (RMD) is a percentage of the value of the tax deferred savings account. If the RMD is 3.25% and you have $100,000 in a 401k, then the amount you must withdraw is $3250. The RMD generally increase year after year. If you only withdraw the RMD annually, you’ll still have money in your account when you’re over 100 years old.
If you fail to take the RMD, then there is a penalty on the amount you didn’t with draw. Suppose in the example above, you were supposed to remove $3250 and only removed $2250, then the penalty would apply to the $1000 and you would owe the IRS 50% or $500.
We’re living OK on the income I’m making now and have been making since “retirement” five years ago. This rule forces me to ‘take” money I don’t need right now and had thought I’d need in my later 70s.
It’s grossly unfair to those of us who have saved and invested for retirement.
One of the interesting aspects of this is that it has to be a percentage of your tax deferred accounts not a percentage of each account individually.
What I did is, I withdraw an amount from several accounts over the year. I have a third account which generates enough income to cover its share plus the difference incurred by under with drawing from the other accounts.
The Funds yell about it but its legal.
50% of the amount you should have taken out.
Yes, those are fair points. That’s why the bulk of my assets are not in retirement accounts and I don’t need them to live on now.
But they are a useful tool if you only make small withdrawals and then leave them to your heirs tax-free. I only made contributions on my highest tax years so I’m coming out ahead on my retirement accounts. I’m not in the 39% bracket any more.
You can do the same with real estate, at least for now.
A comma? I’m only worth a comma?
Short answer..Yes you have to take mrd
These are called Excess Annual Additions. The tax is 50% of the RMD you did not take. Make certain that you base your RMD on the total value of all of your IRAs on, if I recollect, December 31st of the preceding year. (Year end value.)
“You can pass retirement account to heirs upon your death tax free.”
Not true for regular IRA. Your heirs will pay taxes on amounts withdrawn and will be subject to minimum required distribution.
You first!!
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