FINANCIAL FOCUS: Have you started taking your RMDs?

Joe Faulk

Joe Faulk

Published: Friday, November 22, 2013 at 04:36 AM.

Throughout your career, you have been working hard to save in one or more retirement accounts. Once you retire, you’ll have new decisions to make.

But one choice has already been made for you: the age at which you must start taking withdrawals, or distributions.

Once you reach age 70½, you must begin taking taxable withdrawals — known as required minimum distributions, or RMDs — from your traditional IRA and most other retirement plans, such as a 401(k), 403(b) or 457(b). A Roth IRA is not subject to RMDs.

If you turned 70½ in 2013, you may want to take your first RMD no later than Dec. 31. You could wait until April 1, 2014 to take your initial distribution, but you’d then have to take your next one by Dec. 31, 2014 — and two distributions in one year could have a sizable impact on your taxes. After you’ve taken your first RMD, you’ll have to take one by Dec. 31 of each calendar year for the rest of your life — or until your account balance is zero.

These minimum distributions are calculated annually based on your age, account balance at the previous year's end, marital status and spouse's age. If you don't meet the annual minimum distribution, you may be subject to a 50 percent penalty on your underpayment, plus ordinary income tax as funds are withdrawn.

Of course, while you have to take at least the minimum distribution from your retirement plans, you can always take more.

But should you?

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