Ages You Should Notice for Retirement Planning (2)
Over 70 and a half: As mentioned above, you can start withdrawing money from your retirement plan without paying a 10% fine when you are over 59 and a half. Of course, you can't take the money until you're 70 and a half, either. At this point you need to start withdrawing money The IRS term is called RMD (minimum distribution required). This RMD increases every year. 71 years are 26.5 years old, 75 years old are 22.9 years old, 80 years old are 18.7 years old, 90 years old are 11.4 years old, and 100 years old are 6.3 years old.
For example, if you are 71 this year and your retirement plan accounts have 1 million in each account, 1 million divided by 26.5, you should get $ 37,735.85 this year; if you are 75, it is still 1 million, divided by 22.9, you should receive $ 43,668.12 per year, which means that for each year that you are older, the percentage of RMD you withdraw from your retirement account will be a bit higher. The algorithm is calculated based on the total amount in your account as of December 31 of the previous year. The RMD you took in 2014 is the total amount of your retirement plan as of December 31, 2013, divided by the RMD ratio of your age. If you don't take the money or don't take enough RMD, you could be fined 50%.
The IRS does this primarily to collect taxes, because if you don't take money out of your retirement plan, the IRS can't collect taxes. If you're 70 and a half, the bank or financial institution where you opened the account will send you a form asking how much you want. You can get more, but not less. You have 10 accounts, you can only withdraw money from one account, but you need to get enough RMD for all 10 accounts.
If you don't take or don't take enough RMD, the IRS will be fined 50%, which is ruthless! For example, you had 1 million retirement accounts at that time. According to the RMD, you should get 37,000, but you only have 30,000. You will not only have to compensate for the 7,000 that you did not receive next year, but the IRS can also be fined. 3500.
There are two types of retirement plan accounts that do not require RMD, one is Roth IRA and the other is various unqualified retirement plans. Everyone is familiar with Roth IRAs and unqualified retirement plans primarily refer to various annuities (annuities) purchased with after-tax money. The main advantage of annuities is tax deferral. As long as you don't buy them, you don't have to pay taxes. , Pay taxes when you take it out. You can use pre-tax money to buy an annuity, such as an IRA or 401K rollover. If you use pre-tax money to buy an annuity, you will also start taking RMD at age 70 and a half. . However, if the annuity is purchased with after-tax money, it is not subject to RMD and can be kept without money.
Besides tax deferral, another major benefit of annuities is that they can offer lifetime income protection. The insurance company guarantees you a fixed income each year for the rest of your life, regardless of fluctuations in the stock market. As people live longer and longer, purchasing an annuity with guaranteed income for life is also an important part of retirement plans.