Required Minimum Distributions
The end of the year is fast approaching. The new year will be upon us before we know. However, before the end of the year, we need to pause and look at any taxable accounts.
If you are 70 1/2 years of age, you are required to take required minimum distributions form any taxable IRA's, SEP's or others retirement accounts. Failure to do so can result in huge penalties of 50% of the amount that should have been taken. Therefore failure to take the amount required is a huge tax consequence and a loss of your precious income that should be kept in your pocket rather than the IRS.
Because most retirement accounts are tax deferred, at some point IRS wants their portion of what is already theirs. So at 70 1/2, IRS comes in and tells you now is the time to start paying those taxes. So each year they require you to take a larger and larger portion out of your retirement accounts and send the taxes due to the IRS. By doing this it also causes your Social Security to be taxed as well.
Roth's are not required to take Required Minimum Distributions (RMD) so you don't have to worry about any Roth accounts you may have. Traditional IRA's or retirement accounts are the only ones you need to take RMD from that year. You can also combine the total of the RMD and take the entire amount from just one of your IRA's rather than multiple IRA's.
So during your holiday planning, don't forget to make sure you have taken your RMD. If you have not, then contact your IRA holder and request your RMD be sent to you immediately.
Also, if you plan on doing any Roth conversions, they need to be done before the end of the year as well.
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