Ask Andy: IRA withdrawals - WMC Action News 5 - Memphis, Tennessee

Reported by Andy Wise

Ask Andy: IRA withdrawals

"Julia" of Bartlett asks the question every financial advisor gets about 20 times a day:

"I will be 70 years old this year and need to know when and how much money I should start taking out of my IRA funds. Can you help?"

Yes, I can!

First, Julia, since you're turning 70, you might have to collect what's called a required minimum distribution from your IRA.  A REQUIRED MINIMUM DISTRIBUTION is the minimum amount you must withdraw annually starting the year that you turn 70 1/2 or the year you retire, whichever comes first.  

How much you can withdraw depends on what kind of IRA you have and how much is in your account, but it will be calculated on what the TOTAL VALUE of ALL your IRA accounts was on December 31st the year BEFORE you turned 70 and a half.

The IRS says you can actually start withdrawing from your IRA when you turn 59 and a half, but if you withdraw anytime before that, you'll have to pay the taxes on that money plus a 10 percent penalty.  There are two exceptions:  school tuition and up to $10,000 for first-time home buyers.  

A financial advisor I trust tells me the federal government is offering an exemption this year for the required minimum distribution.  He says if you turned 70 and a half last year ('08), you will not have to withdraw a required minimum distribution.  He says the exemption was passed to allow older investors to keep that money in their accounts a little longer, hopefully to earn a little more.

Here are a couple links to great information about IRA withdrawals:

http://www.bankrate.com/brm/itax/tips/20030410a1.asp

http://www.irs.gov/retirement/article/0,,id=96989,00.html#1

 

Powered by Frankly