As we approach the end of the year, it is time to make sure all of your retirement and estate planning tools are up to date and working for you. One item that may have slipped many peoples’ minds is taking any required IRA withdrawal. It is important to make sure you take a withdrawal because the failure to do some could result in some harsh tax-related consequences – namely a 50% tax on the amount you were supposed to withdraw from the account.
As you may recall, the law was changed a few years ago allowing individuals aged 70.5 or older to defer their required withdrawals in 2009. The change was in response to the dramatic downturn in the markets and substantial losses that many retirees incurred in their IRA accounts. The idea was to allow retirees to leave more money in their accounts in order to help generate more income and regenerate their retirement savings.
Many individuals took advantage of the change and skipped distributions last year, but what many didn’t realize is that required withdrawals were reinstated for the year 2010. According to one survey, as many as 20% of retirees have yet to take their 2010 withdrawal, which generally must be done before the end of the year.
If you still must take a required withdrawal, now may be the time to talk to someone about making sure you calculate the right withdrawal amount. In addition, if you are interested in how those accounts will be passed on to your loved ones, or interested in how you can protect assets from taxes, making an appointment to speak with an estate planning lawyer may be a good idea.
Source: USA Today, Don’t forget to take that IRA distribution before year’s end, Sandra Block 12/7/10