The baby boom generation, those born between 1946 and 1964, includes about 76 million people. That generation is now heading into retirement, with roughly 10,000 boomers expected to retire every day between now and 2030. If you or a family member are part of this group, do you know what tax and other financial issues you should be considering? The Pennsylvania Institute of Certified Public Accountants provides these tips.
RMD Deadline
Required minimum distributions (RMDs) can create a potentially expensive pitfall for those who aren’t aware of the important rules surrounding them. RMD rules apply to traditional individual retirement accounts and IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRAs. If you have an IRA, you must take your first required minimum distribution for the year in which you turn age 70-1/2, though the first payment can be delayed until April 1 of the year following. So, if you turned 70 on May 15, 2014, you hit 70-1/2 on Nov. 15, 2014; you would need to start taking IRA distributions by April 1. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by Dec. 31 of the year. The amount of the RMD is generally calculated by dividing the prior Dec. 31 balance of your account by a life expectancy factor, which is published in IRS tables. Any withdrawals you take will be included in your taxable income (unless they have already been taxed, as would be the case with a Roth IRA, for example). If you miss the RMD deadline, fail to withdraw an RMD, or fail to withdraw the full amount of the RMD, the amount not withdrawn is taxed at 50 percent. It’s important to note that the RMD rules do not apply to Roth IRAs while the owner is alive.
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