Under these rules, you must 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 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.
Why is that important? 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. In general, you're
required to withdraw RMDs 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.
To discuss these and other RMD rules, give us a call at (518) 798-3330.
We can help you create a sound distribution plan.
