Withdrawing IRA Funds Before Year End – Part 1
As we get to the close of the year, many seniors if they haven’t done so already must withdraw enough from their retirement accounts to meet required minimum distribution requirements. The tax deferred status of these accounts can increase their value substantially, however, eventually the government wants its share in taxes. The RMD rules force that to happen.
For most, RMD doesn’t apply until the account owner reaches age 70 and 1/2. Two years ago the tax laws were change to raise the age to 72 and 1/2 for anyone not already taking RMD. Failing to take enough RMD can cause a pretty hefty penalty of 50% on top of what should have been taken but wasn’t.
Everything this year, however, is different because of the pandemic. There were some changes to retirement accounts contained in the CARES Act, the comprehensive law passed in March to provide economic relief to Americans from the effects of COVID. That includes the RMD rules (which were suspended this year).
Next week we’ll review what those change are.