If you are age 70 1/2—or nearing that age-- and have assets in tax qualified accounts (traditional IRA; 401(k); 403(b); SEP/SARSEP; 457(b); etc.)….the IRS wants you.
Actually, it’s not that they want you so much, but the IRS does want the taxes from your Required Minimum Distribution(RMD) by December 31, each year.
And it is a requirement.
This is the minimum amount you must withdraw. You can withdraw more if you like, but not less. If you fail to take your entire RMD, a 50% penalty is assessed on the amount not withdrawn.
Hint: If longevity runs in your family, you should know that you must withdraw any remaining funds by your 115th birthday.
Here are the rest of the ABCs for RMDs:
-You must take the RMD whether or not you need the money
-Withdrawals count as income in the year in which they were withdrawn, and are reported to you on a Form 1099
-If you are looking for a way to avoid paying taxes, you might want to consider having your RMD paid directly to a charitable organization (501c3)
-RMDs can be reinvested in a non-tax-qualified plan (after you pay your taxes).*
*The information provided regarding tax law or regulation is general in nature and may not apply to a particular individual’s circumstances. Neither cfd Investments, Inc. nor Creative Financial Designs, Inc. nor Covenant Financial Group provide legal or tax advice. Clients are directed to consult with their legal or tax counsel regarding such matters.