Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Deadline Looms for Certain Retirement Investors

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Deadline Looms for Certain Retirement Investors

Article excerpt

At a time of year when many people are focused on gifts and holiday parties, retirement investors aged 701/2 face a looming deadline of Dec. 31 to withdraw money from company retirement plans and traditional IRAs -- or face a severe penalty.

The required minimum distribution rule was put in place to make sure that individual retirement account and 401(k) account owners who have been saving on a tax-deferred basis for many years finally begin paying their share of taxes, rather than hoarding the money indefinitely and ending up leaving a lump sum to heirs that has never been taxed.

Consequences for not making the required withdrawals can be dear - - a tax penalty that amounts to 50 percent of what should have been taken out.

"Since it is one of the highest penalties that the IRS imposes, it gives a clear indication as to how closely the government watches this requirement," said P.J. DiNuzzo, president and CEO of DiNuzzo Index Advisors in Beaver. "They have waited decades and decades in many cases to get their hands on your tax money."

He noted that someone who started a qualified retirement plan in their 20s could have retirement assets shielded from IRS taxation for more than 40 or 50 years.

The Internal Revenue Service has established a uniform lifetime table to determine what percentage of the account must be withdrawn at different ages. For example, if the IRA account balance is $100,000 and the account owner is 70 with a birthday before June 30, that person would need to withdraw $3,649.64.

Retirement account owners who are 701/2 years old and have a spouse more than 10 years younger are subject to a different required minimum distribution schedule and are usually required to withdraw less money annually.

Also, for people scheduled to make their first required distribution, the IRS will allow a delay until April the following year. That means, if someone's first minimum distribution should occur this December, he or she could postpone it until April 1, 2014. …

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