IRA Fund Distributions After age 59 1/2, and before April 1 of year following age 70 1/2


A

askalot

I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.

Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.

When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.

Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?

Any guidance for planning purposes will be appreciated.
 
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J

joetaxpayer

askalot said:
I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.

Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.
This has no impact on your RMD (except that you've reduced
the account a bit, and RMD is based on the balance from
prior year end)
When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.
If Nov 08 is your 70.5 date, you mean Apr 09 for 08 RMD and
then by Dec 09 for the 09 RMD. (i.e you will have two
distributions if you wait till Apr)
Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?

Any guidance for planning purposes will be appreciated.
See http://www.irs.gov/publications/p590/ch01.html#d0e5473
for further details on this. Also, consider converting some
IRA money each year to a Roth IRA, depending on your tax
bracket, this may save you money in the long run, and smooth
out the RMDs a bit as the RMD numbers continue to rise. JOE
 
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B

Bill

(e-mail address removed) (askalot) posted:
I know that for conventional IRA's on which no
taxes have been withheld, that I must begin
removing a prescribed amount of funds before
1 April of the year following the date of
becoming 70 1/2.
You mean, I'm sure, to say "on which no taxes have been
_paid_.
Since reaching 59 1/2, I have on several
occasions removed funds from my IRA.
When I reach 70 1/2 in November of 2008 I
will need to remove an estimated $11,000
before 1 April 2008.
Actually, the rule states that you must take a calculated
RMD (Required Minimum Distribution) by April 1 of the year
following the tax year in which you reach age 70 1/2. In
the example given, that would be by April 1 of _2009_.
However, that would result in a "double dip" requirement for
2009, since you would also be required to take an RMD that
year. So, most advisors would recommend taking the
distribution in the year required (or 2008, in your
instance). Otherwise, you might be kicked into a higher
marginal bracket for 2009 by the "double dip."
Over the past 3 years I have removed about
$7,000 from my IRA account.
My question is, can this $7,000 count toward
my first required distribution.?
No. Absolutely not. As with all other tax issues, the
income must be reported in the year received. So whenever
you took those earlier distributions, you should have
included them in your taxable income for the appropriate
year (as I'm sure you did, because the trustee would have
sent you a 1099 for the amount distributed).

Bill
 
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A

A.G. Kalman

askalot said:
I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.

Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.

When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.

Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?

Any guidance for planning purposes will be appreciated.
In your first sentence delete the words "on which no taxes
have been withheld." You must start taking your RMD from a
traditional IRA in the year you attain age 70 1/2. You may
delay the first RMD until 4/1 of the next year without
incurring penalty.

If you turn age 70 1/2 in 11/08, your first RMD must be
taken no later than 4/1/09. Any distribution you take in
2008 will count as part of your RMD. Any distributions
taken prior to 2008 do not count against your RMD.
 
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H

Harlan Lunsford

askalot said:
I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.

Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.

When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.
One of those year dates is incorrect I think. If the first
is correct, then you will need to take 2008's distribution
before April 1 2009.
Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?
Nope. Minimum required is based on previous 12/31 balances.

Holiday ChEAr$,
Harlan Lunsford, EA n LA
 
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H

Herb Smith

askalot said:
I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.

Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.

When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.
I think you meant April 1, 2009. The exact amount required
will be based on your account balance as of December 31,
2007.
Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?
Absolutely NOT.
 
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P

Phil Marti

askalot said:
I know that for conventional IRA's on which no taxes have
been withheld, that I must begin removing a prescribed
amount of funds before 1 April of the year following the
date of becoming 70 1/2.
Close enough. Actually, April 1 is timely.
Since reaching 59 1/2, I have on several occasions removed
funds from my IRA.

When I reach 70 1/2 in November of 2008 I will need to
remove an estimated $11,000 before 1 April 2008.
I don't know whether this is a typo or you're confused. If
you turn 70 1/2 in 2008, you must take a distribution for
2008 by 4/1/2009. You also must take a distribution for
2009 between 1/1/2009 and 12/31/2009.
Over the past 3 years I have removed about $7,000 from my
IRA account.

My question is, can this $7,000 count toward my first
required distribution.?
No. Your 2008 required distribution will be based on your
12/31/2007 account balance and must be taken between
1/1/2008 and 4/1/2009. See IRS Publication 590.
Any guidance for planning purposes will be appreciated.
While you can delay your 2008 distribution until 2009, you
would then have to take two years' distributions in 2009.
This could lead to an unwelcome spike in your 2009 income,
depending on what amounts we're talking about.

Some people try to withdraw enough each year between 59 1/2
and 70 1/2 to reach the top of the current bracket, thus
reducing the balance that will be subject to the minimum
distributions. It really depends on your overall situation
and plans and needs for the IRA funds.

Converting a portion to Roth each year is also an option if
you are eligible. That also reduces the balance subject to
mandatory distribution, and Roths don't have required
distributions.

If the amounts are significant, you might benefit from a
session with a fee-based financial planner.
 
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