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The Online Advisor - March 2000
April 1 is an important date for IRA owners
Like all good things, the tax deferral opportunities of an individual retirement account (IRA) eventually come to an end.
Reaching age 70-1/2 is the event that triggers the beginning of the end. Mandatory withdrawals must begin no later than April 1 of the year following the year in which you reach age 70-1/2. (Withdrawals may start as early as age 59-1/2.) For example, if you reach age 70-1/2 in 2000, mandatory withdrawals must begin by April 1, 2001. Required withdrawals can be a lump sum or periodic over a number of years.
If periodic distributions are chosen, they must be made each year. The initial distribution can be made in the year you turn 70-1/2 or delayed until April 1 of the following year. If you delay the first distribution, you must take and pay tax on two distributions in the same year.
If annual distributions are chosen, they can be based on your life expectancy or the combined life expectancies of you and your beneficiary (within limits), but you must decide this up front. You could also have the choice of "locking in" your life expectancy at age 70-1/2 or recalculating it every year.
The minimum withdrawal requirement for IRAs does not apply to Roth IRAs.
If you're facing this situation, contact us soon. We can help you sort through your options and choose what's best for you.