If you’re approaching retirement or already retired, you may have a traditional IRA, SIMPLE IRA, or SEP. If you do, at a specific age you must take a minimum distribution. This minimum distribution is required by the government when you reach the age of 70 ½. It is not only done one time but this minimum distribution is required on a yearly basis. The required minimum distribution is important and must be followed to keep you from getting fines and penalties from the IRS. You are allowed to withdraw more than the required minimum distribution if you choose but you must withdraw from each account individually.
How The Required Minimum Distribution Is Calculated
When calculating a required minimum distribution for any given year, it is always wise to confirm on the Internal Revenue Services website that you are using the latest calculation worksheets. If you are currently still in the workforce at 70 ½ then on some occasions the plan will allow you to only perform a required minimum distribution after you retire. If you have a Roth IRA, a withdrawal is not required until the owner of the IRA dies. The main purpose of the required minimum distribution is to make sure that these individuals with these retirement accounts are not avoiding paying taxes.
The Mistakes That Should Be Avoided When It Comes To RMD
There are mistakes that individuals with retirement accounts should avoid because they can lead to expensive penalties and fines with the IRS. A common mistake made is not remembering that their RMD withdrawal is due! Some retirees that need to take RMD’s also make the mistake of not having a plan in place for the required withdrawals over the long term, accidentally withdrawing the wrong amount.
“Even A Small Miscalculation Can Result In Big Fines and Penalties”
The Consequences of Making Mistakes With RMD
There can be consequences to mistakes made in regards to RMD’s. If you forget to make a payment or make a mistake the fine is 50 percent of the amount that should have been withdrawn plus the income tax that is owed. This can be reason enough to consult a financial professional. A financial professional can assist you in calculating the right amount to withdrawal without mistakes where penalties will apply. If you make long-term plans when it comes to making your RMD, a professional can assist in minimizing your taxes.
There is a lot to think about when it comes to planning for retirement. We are here to help you to and through your golden years.