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 ...
MSN/CNBC combo. Could be fake news. We may never know.
I cannot address the tax penalty; however, my mother’s Edward Jones agent contacts me each year for approval to transfer investment funds to Mother’s checking/savings account. There is an acronym/name she uses, but I do not know what it is without looking it up.
BTDR
No, it’s not ‘fake news’. You will be hit with a fifty percent penalty if you do not take RMD as required by law.
,
50% of what, exactly?
Normally, your brokerage house should be screaming at you if you don’t take it. They know how old you are, and how much is in your IRA, so they will unleash a stream of warnings.
You also have to take a RMD from non-sposal inherited IRAs, both regular and Roth, regardless of your age. If you inherit an IRA, you should study the rules carefully. You can make them work to your advantage to maximize the income you receive.
That’s exactly right, any brokerage will do the same, amking the calculation, and you just do what they say.
Either sell shares if there is not enough cash in the account; or, write a check to yourself, or, if you have a street account at the same brokerage, you can transfer shares from your IRA to your street account without actually selling anything.
This is under IRS Publication 590 or “Rule 590.”
I wrote to our new president about this issue.
Hope he can do something about it because it is a tax on already taxed savings.
A tax on a tax.
Yet another fine reason to abolish the IRS.
Bttt.
5.56mm
Study
RMD.
The whole idea of an IRA is that both the principal originally deposited, and the resulting profits, were never taxed. That’s why you’re taxed when you take out the money.
how about ira tax sale 15% all tax proceeds to debt reduction.
would be excellent economic boost.
50% of the required minimum distribution. For example, if you are required to withdraw $4000 per month from your retirement plan accumulation, the penalty is $2000 per month until,you comply.
IRAs are a bad deal in so many ways...
50% of the RMD the taxpayer was required to take in that tax year.
This article raises a question. It says you don’t have to take a distribution even after the age of 70.5 if you aren’t “retired”.
I collect Social Security, but also have Schedule C income from actively managed rental real estate and playing music.
So, it sounds to me like I’m not retired and don’t have to take a RMD at age 70.5.
Another question for my accountant.
Maybe, maybe not. 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.
I’m going to look into this business about not having to take a distribution if I haven’t retired as I mention in an above comment.
You can pass retirement account to heirs upon your death tax free. I’d like to do that if possible.
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