Remember to take your RMDs!

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By Marc Frye

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OK, I have a serious condition called CRS. I’m sure a lot of you suffer from this condition from time to time. The acronym is for Can’t Remember Stuff. We usually make sure that “to do’s” get on our calendar and put reminders on our phones, doors, and desks. Well, I want to make sure that our clients don’t forget a very important something. That’s to take your Required Minimum Distribution (or RMD) from your qualified retirement account.

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You must start making regular minimum distributions from your traditional IRA by April 1st following the year in which you reach age 70 ½. Failing to take out enough triggers one of the most draconian of all IRS penalties:

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•A 50% excise tax on the amount you should have withdrawn based on your age, your life expectancy, and the amount in the account at the beginning of the year.

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•After that, annual withdrawals must be made by December 31 to avoid the penalty.

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When you make withdrawals, consider asking your IRA custodian to withhold tax from the payment. Withholding is voluntary, and you set the amount, but opting for withholding lets you avoid the hassle of making quarterly estimated tax payments.

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Important note: One of the advantages of Roth IRAs is that the original owner is never required to withdraw money from the accounts. The required minimum distributions apply to traditional IRAs.

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If we at American Retirement Advisors can be of assistance, just give us a call. Stay warm, and I’ll write again next issue.