Older Ira Investors Alert On RMD Tax Penalty

(PRWEB) February 8, 2005

IRA investors who reached age 70 ½ last year should begin taking a Required Minimum Distribution (RMD) from their accounts by April 1, 2005 to avoid being subject to a hefty 50% tax penalty, according to retirement specialists at Lamaute Capital, Inc. (http://www.investsafe.com). The IRS requires most people who turn 70 ½ to begin withdrawing a minimum amount every year from their IRAs and other tax deferred retirement accounts. You have until April 1 of the year following the year you turn 70 1/2 to start taking your RMD.

It can be costly if you don’t follow the IRS requirements for taking the RMDs. You could be charged a 50% federal tax penalty on the RMD amounts that you should have received – on top of any income tax you might owe on the RMD. The RMD do not apply to Roth IRAs, unless they’re inherited. If you own several IRAs, you can elect to take an RMD for each of your IRAs, or take the total RMDs from one or more account.

Luckily, most financial firms with custody of your retirement accounts will automatically calculate your RMD for you and send you a distribution check. However, problems sometime arise if they have inaccurate information on you such as your date of birth or your latest mailing address. You remain responsible for meeting the RMD requirements. “Now, may be a good time for mature investors to look into consolidating some of their retirement accounts, as a way to simplify their record keeping and keep things from falling thru the cracks”, advises Daniel Lamaute, of Lamaute Capital.

Your RMD amount is calculated by dividing your December 31 account value by your life expectancy factor as given in an IRS Uniform Table. If your spouse is more than 10 years younger than you and is your sole beneficiary, you can reduce the amount of your RMD. Use the Joint Life Expectancy Table (Table II) that can be found in IRS Publication 590.

Lamaute Capital (http://www.investsafe.com) specializes in retirement plans and describes methods to minimize tax penalties on early withdrawals. Tax laws and regulations are complex and subject to change. Please consult an attorney or tax advisor about your particular situation.

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