Tax Tip of the Week
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There are two very important years for a traditional
IRA
For the week of
December 4, 2000
A traditional IRA is a tax-favored means of saving for your
retirement and as such it has some very strict rules limiting the withdrawal and use of your IRA assets. The important
years are when you turn age 59½ and when you reach age 70½.
Violation of the rules generally results in additional taxes in the year of violation. Generally, until you reach
age 59½, you must pay a 10% penalty if you withdraw assets (money or other property) from your traditional
IRA. This penalty is in addition to the regular income tax you will pay on the distribution.
You can withdraw assets from your traditional IRA after you reach age 59½ without penalty. Even though you
can, you do not need to withdraw any assets from your IRA until you reach age 70½.
You cannot keep funds in a traditional IRA indefinitely. Eventually, you must withdraw them. If you do not make
any withdrawals, or if you do not withdraw enough, you may have to pay a 50% excise tax on the amount not withdrawn
as required.
You can withdraw the entire balance in your traditional IRA or start receiving periodic distributions from it by
April 1 of the year following the year in which you reach age 70½.
Planning for distributions from your retirement
account should be part of your greater retirement and estate planning. If you would like assistance, please contact
us. We are here to help you.
Click here to view previous tax tips.
"Tax Tips" are published weekly to
provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders,
and current tax information.
The information contained in this site is of a general nature and should not be acted upon in your specific situation
without further details and/or professional assistance.
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