6-20-2018

What Goes In, Must Come Out
 
We’ve all heard that “what goes up, must come down.” How about “what goes in, must come out”? If you or someone you know owns an IRA, 401(k), 403(b), Thrift Savings Plan, or some other retirement vehicle, please consider the following.
 
We contribute money to our retirement accounts in hopes that one day we will be able to retire in comfort. However, this is not the only reason that people contribute to their plans: many Americans contribute in order to reduce their taxes. Monies contributed to these plans are typically not taxed in the calendar year during which they were contributed. It sounds great up front, but is it really possible you can defer taxes on these monies forever?
 
You guessed it: the answer is no. By the time you reach age 70½, you must begin withdrawing what is known as a Required Minimum Distribution (RMD), which is subject to both Federal and State taxes. For many people, RMDs raise a plethora of questions due to all the rules that surround them.
 
It is important to note the following regarding RMDs: If you miss taking your RMD or take the incorrect amount, you may be assessed a penalty by the IRS of up to 50% of the RMD amount that you did not take, even if it was an accidental oversight. Federal and state taxes still apply in these situations as well. As you can imagine, all of this can add up quickly, so RMDs are not something you want to miss.
 
If you have questions about RMDs, contact an advisor today and make sure you have a plan that acknowledges both when and how best to utilize these monies. 

Jac M. Arbour, CFP®, ChFC®
President