IRA Withdrawal at 70 1/2

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Did you (or your spouse) celebrate your 70th birthday between July 1 and December 31 of last year, or you will turn 70 ½ between January 1 and June 30 of this year?  Do you (or your spouse) have an IRA, either Traditional or Roth?  If you answered yes to both questions, please keep reading.  The IRS requires you to make a withdrawal from your IRA the year you turn 70 ½ years old.

The rules are clear.  If you have a financial advisor, he or she should have contacted you about setting-up a distribution plan by now.  What if you don’t have a financial advisor?  Then try your accountant.  You don’t have an accountant?  Then you have to figure it out on your own.  Call the financial institution that holds your IRA. The last stop may Google or www.irs.gov.

Next is a snapshot of the IRS rules governing IRA distributions.

How much must I take out at 70 ½?  You must make a “required minimum distribution” (RMD) beginning with the year you turn 70 ½.  The RMD is calculated by dividing the IRA account balance as of December 31 by your life expectancy (or applicable distribution period). 

How do I find out my life expectancy or applicable distribution period?  Ask your financial advisor or accountant.  If you need or want to look it up, tryPublication 590 (2011), Individual Retirement Arrangements (IRAs), Table I, Table II or Table III.

Can I make a qualified charitable contribution to satisfy my “required minimum distribution?”  Yes, it may satisfy all or part of your distribution.  The contribution is subtracted from your RMD.  You must withdraw the remaining balance for the year.  Let’s say your RMD for the year is $10,000 and you donate $5,000.  You still have to withdraw the remaining $5000.  

How do I make a qualified charitable contribution?  Again, ask yourfinancial advisor or accountant.  Remember, the donation has to be made to a “qualified” charity, so work with your financial advisor or accountant.

I am over 70 ½ and still working, must I make a “required minimum distribution?”  Yes, there is no exception.

I am over 70 ½ and the owner of the company, must I make a “required minimum distribution?”  Yes.

That’s it in a nutshell.  I just wanted you to be aware of what your government requires from you in case you did not know.

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