Retirement Account RMD: Use It or Lose It

10:42 am Uncategorized

Retirement accounts were created to offer special tax incentives to help Americans save for retirement.  However, traditional IRAs and 401(k)s require that you start taking the required minimum distribution (RMD) as soon as you reach the age of 70 ½.  If you do not take out the minimum amount required by December 31 each year, you can get hit with a 50 percent penalty on the amount you should have withdrawn.

In addition, if you have an inherited IRA or 401(k) – and are not a spouse entitled to a penalty-free rollover – you will have to start taking the RMD each year as well, no matter how old you are.

How is the minimum amount determined?  There is no easy answer – it varies by age and is based on life expectancy tables formulated by the IRS (Publication 590).  So it changes every year.  In fact, last year RMDs were suspended altogether because of the economic downturn.

Calculating the proper RMD is an important part of retirement planning, and a California estate planning attorney can help you plan properly so you don’t incur any tax penalties.

Let our Costa Mesa law offices help you get started by contacting us today.

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