Once you reach age 70½, the required minimum distribution
(RMD) rules say you have to withdraw at least a minimum amount from your
retirement plans each year. Since the withdrawals are considered ordinary
income, planning in advance can help you prepare for the impact on your federal
income tax return. Here are two suggestions.
● Make a list of your accounts. The rules
require an RMD calculation for each plan. With traditional IRAs, including SEP
and SIMPLE plans, you can take the total distribution from one or more
accounts, in any amount you choose. You can also take more than the minimum. However,
withdrawals from different types of retirement plans can't be combined. Say for
instance, you have one 401(k) and one IRA. You have to figure the RMD for each
and take separate distributions. Failing to take distributions, or taking less
than is required, could result in a penalty of 50% of the shortfall.
● Plan your required beginning date. The
general rule says you're required to withdraw your RMD by December 31, starting
in the year you turn 70½. The rules provide one exception: You have the option
of postponing your first withdrawal until April 1 of the following year.
Delaying income can be a sound tax move. But because you'll
still have to take your second distribution by December 31, you'll receive two
distributions in the same year, which can increase your taxes.
Contact us before year-end to discuss your retirement plan
distributions. We can help you create a sound plan.
No comments:
Post a Comment