SmartMoney Blogs

The Tax Blog
The latest news, insights and tips about taxes

That Other April Deadline

Tick tock. There’s a deadline creeping up on some of you. And it’s not April 18. If you turned 70½ in 2010 you have until April 1, 2011 to take your first required minimum distributions (RMDs) from all tax-deferred accounts such as individual retirement accounts (excluding Roths) and 401(k)s.

The IRS requires you to take a minimum amount of money from your tax-deferred retirement accounts each year beginning the calendar year after you turn 70½. Typically, you need to do this before December 31. However, you get a three-month extension into the following year for your first distribution. Be aware that if you waited until April to take that first withdrawal, you must take two in a single calendar year. That could end up boosting you into a higher tax bracket.

If you don’t take your distribution on time, you’ll likely get hit with a penalty of up to 50% of the amount not taken.

Figuring out the amount of your first and future RMDs isn’t complicated. Take the year-end balance on your account and divide by a so-called life-expectancy factor, which you’ll find on the Uniform Lifetime Table provided by the IRS. (The IRS provides two different tables depending on your marital status, the age of your spouse and the beneficiary of your account.) “Once people get into a rhythm, things tend to go more smoothly,” says Stuart Ritter, a vice president and certified financial planner at T. Rowe Price.

If you have multiple IRAs, you have the option to calculate the RMD for each account and make an aggregate withdrawal from one. This isn’t the case for 401(k) plans, which require owners to withdraw (at least) that calculated amount from each account owned.

If you’re approaching 70½, it’s a good idea to get in touch with your financial-services firm to map out your distributions. The IRS does require firms to send statements regarding RMDs to clients by January 31st of the year they turn 70½ (as long as that firm holds the client’s IRA as of December 31st of the prior year and an RMD is required). Some financial services firms send their own reminders to clients approaching the RMD deadline.

If you’re already taking distributions, say every month, that add up to at least the minimum amount, you don’t have to make an additional withdrawal. And you can always take out more than the RMD calculation: “‘M’ stands for minimum,” says Ritter.

Readers, did your financial-services firm do a thorough job of coaching you or your family member’s approach to 70½?


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 37)

View all Comments »
    • I will tools this study to 2 types of folks: current Zune home owners who are thinking about an enhance, and Those people seeking towards make your mind up involving a Zune and an iPod. (There are other players really worth thinking about out there, such as the Sony Walkman X, still I hope this provides oneself enough info to deliver an informed decision of the Zune vs players other than the iPod line as effectively.)


    • Apple presently has Rhapsody as an app, which is a fantastic start off, nevertheless it is at the moment hampered by way of the incapability towards keep domestically on your iPod, and is made up of a dismal 64kbps bit price. If this adjustments, then it will relatively negate this convenience for the Zune, nonetheless the Ten audio per thirty day period will even now be a massive moreover in Zune Pass’ desire.


    • If you’re nonetheless upon the fence: seize your favorite earphones, thoughts down toward a Perfect Acquire and request to plug them into a Zune then an iPod and view which 1 seems improved to yourself, and which interface would make you smile far more. Then you are going to realize which is instantly for yourself.


    • The fresh new Zune browser is amazingly constructive, nevertheless not as good as the iPod’s. It performs properly, nevertheless isn’t really as prompt as Safari, and is made up of a clunkier interface. If on your own from time to time system upon employing the net browser that is not an issue, but if you’re creating in direction of go through the website alot towards your PMP then the iPod’s much larger display and greater browser may perhaps be important.


    • I am going to equipment this study towards Two products of us citizens: recent Zune property owners who are considering an up grade, and All those seeking in the direction of determine amongst a Zune and an iPod. (There are other gamers great importance taking into consideration out there, including the Sony Walkman X, still I hope this offers on your own more than enough facts in direction of generate an knowledgeable decision of the Zune vs players other than the iPod line as very well.)


About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.