How the heck were you supposed to know that you have to withdraw certain amounts out of your IRA?
Once you reach age 70½, if you have money in traditional IRAs- or other formal retirement plans like a 401k, 403b, 457, or deferred compensation- then you must take a RMD (Required Minimum Distribution). The amount you must withdraw is based on your age and your account balance from December 31st of the prior year.
This RMD amount (percentage) increases EVERY year until you pass away. That right there is the perfect example of “Death and Taxes”. What happens if you don’t take out the required amount? You can owe a penalty tax of up to 50 percent of the amount you were supposed to take!
Required distributions can also apply to inherited IRAs even if you are under age 70½. Don’t forget- if the market crashes and you take a loss in your account you STILL have to take your RMD! That really depletes your account in a hurry.
Most forms of retirement income is taxable. For example, pensions are taxable income, and your Social Security may be subject to taxation too. You’ll report interest, dividends and capital gains on any non-retirement accounts as well.
Retirement is the worst time to be worrying about taxes. The goal for retired and soon-to-retire individuals is to make sure that you don’t run out of money and avoid taxes as much as possible. Make sure you have some safety as a market correction appears to be looming. Contact our offices and ask for J.R. and we would be glad to help you.