Newspaper article THE JOURNAL RECORD

Withdrawals Can Be Made from Ira Account without Penalty

Newspaper article THE JOURNAL RECORD

Withdrawals Can Be Made from Ira Account without Penalty

Article excerpt

Some people, like yours truly and several other members of The Journal Record newsroom staff, have been reluctant to contribute to an Individual Retirement Account because they thought they could not make early withdrawals from their accounts.

According to Norman accountant Ken Reynolds, they were wrong.

In many cases, IRA holders will be penalized for pulling money out of their retirement accounts before age 59 1/2.

But if the money withdrawn is part of a series of relatively equal periodic payments based on the life expectancy of the IRA holder, the Internal Revenue Service won't penalize that person, Reynolds said.

The payments must continue without change until the IRA holder reaches age 59 1/2, or for five years, whichever comes first.

The IRA holder has three alternatives to determine how much the IRS will allow a person to withdraw annually: the life expectancy, amortization and annuity method.

The life expectancy method pays the least but is the easiest to calculate, Reynolds said. The IRA holder can ask their financial consultant for the holder's life expectancy, add together the holder's IRA account totals at Dec. 31 of the previous year and divide by the number of years remaining in the holder's expected life. Because of interest accumulated by the account, the holder may be able to withdraw more money the following year, Reynolds said.

The amortization method allows the IRA holder to withdraw all the interest earned on the IRA each year and enough of the principal each year to clean out the account by the end of the holder's life expectancy, Reynolds said. Users of this method run the risk of having their money withdrawn before their final breath, but more money could be withdrawn initially, he said.

The third method, an annuity plan, is similar to the amortization method, but bases its annual payment on an annuity table, Reynolds said.

One caveat: before planning that trip to Aruba or that shopping spree on Rodeo Drive, Reynolds said IRA holders need professional guidance to set up the withdrawal plan. Without that guidance, expensive mistakes could be made. . .

- A seminar on workers compensation and unemployment insurance that promises to answer everything participants ever wanted to know about these types of insurance, but were afraid to ask, has been set for Sept. 6.

The seminar is sponsored by the Oklahoma State Chamber of Commerce and Industry. The Oklahoma City seminar runs from 8:30 a.m. to noon in the Rotunda Room of Lincoln Plaza. …

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