Ira Distributions Deadline For Seniors

IRA investors who reached age 70 ½ last year should begin taking a Required Minimum Distribution (RMD) from their accounts by April 1, this year to avoid being subject to a hefty 50% tax penalty.

The IRS requires most people who turn 70 ½ to begin withdrawing a minimum amount every year from their IRAs and other tax deferred retirement accounts. You have until April 1 of the year following the year you turn 70 1/2 to start taking your RMD.

It can be costly if you don’t follow the IRS requirements for taking the RMDs. You could be charged a 50% federal tax penalty on the RMD amounts that you should have received in addition to any income tax you might owe on the RMD.

The RMD do not apply to Roth IRAs, unless they’re inherited. If you own several IRAs, you can elect to take an RMD for each of your IRAs, or take the total RMDs from one or more account.

Luckily, most financial firms with custody of your retirement accounts will automatically calculate your RMD for you and send you a distribution check. However, problems sometimes occur if your date of birth on file is not accurate or if you have moved and have not notified your IRA custodian(s) of your latest mailing address. In any case, you are the one responsible for meeting the RMD requirements.

Now, may be a good time for mature investors to look into consolidating some of their retirement accounts, as a way to simplify their record keeping and keep things from falling thru the cracks, according to retirement plan experts at Lamaute Capital, Inc. (www.investsafe.com).

Your RMD amount is calculated by dividing your December 31 account value by your life expectancy factor as given in an IRS Uniform Table. If your spouse is more than 10 years younger than you and is your sole beneficiary, you can reduce the amount of your RMD. Use the Joint Life Expectancy Table (Table II) that can be found in IRS Publication 590.

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