At age 701/2 if you haven't made any withdrawals froman Ira in which you rolled a 401k, you are forced to take two withdrawals, plus pay a large tax fine.Is this a fact?Can you comment on this,and the best time to start taking withdrawals. I have been told ,start 59 1/2moving money out of the Ira into a tax managed acct.I don't need this money to live on,therefore what is the best thing to do?????thanks
As a general rule, you must, at age 70 1/2 start taking minimum distributions from the sum total of all of your deferred accounts (401(k)'s, IRA's, rollover IRA's, SEP's, etc). However, you need not withdraw from each separate account; simply withdraw enough money in total from whichever accounts you so choose to meet the minimum distrbution amount.Regards when to start, if you so choose before age 70 1/2 is up to you. If you don't need the money to live on, and all else is equal, IMHO I would let the money run; particularly in light of the possibility of lower tax rates in the near term future years. Another strategy is to withdraw only enough each year to keep you in the 15% tax bracket, if appicable given your other sources of income.
<<As a general rule, you must, at age 70 1/2 start taking minimum distributions from the sum total of all of your deferred accounts (401(k)'s, IRA's, rollover IRA's, SEP's, etc). However, you need not withdraw from each separate account; simply withdraw enough money in total from whichever accounts you so choose to meet the minimum distrbution amount.>>You can combine all your IRAs together for the calculation and take the minimum distribution from just one of them. However, you must take a minimum distribution from EACH 401(k) plan in which you have assets. Minimum distributions are required from IRAs. Minimum distributions are NOT required from a 401(k) plan IF you are still working for that firm AND you are not a 5% or more owner.To spread the tax burden:The first distribution is due by the April 1 of the year after you turn 70 1/2. The second distribution is due by the December 31st of the same year. HOWEVER, you can take the first distribution in the year you turn 70 1/2.Example: You turn 70 1/2 on January 15, 1999First distribution calculated based on market value on Dec 31, 1998. Distribution due April 1, 2000.Choice: Taxable 1999: take the 1st distribution before January 1, 2000 OR Taxable 2000: take the 1st distribution before April 1, 2001. Second distribution: Taxable 2000 If you took choice 1. Calculated on market value of account(s) on Dec 31, 1999 If you took choice 2. Calculated on market value of account(s) on Dec 31, 1999 less the first distribution taken between January 1, 2000 and April 1, 2000If taking 2 distributions between the two tax years keeps your marginal tax rate down, then IMHO you should choose Choice 1.
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