April 1: Deadline to Take First Required Minimum Distribution
April 1 is fast approaching, and if you turned 70 1/2 in 2014, you may want to mark this day on your calendar.
Those who celebrated that pivotal half birthday last year have until April 1 to take their first “required minimum distribution” (RMD) from their retirement accounts. If you do not take the distribution, you will face a 50% penalty on the amount you were supposed to withdraw.
The requirement applies to a majority of tax-deferred accounts, including traditional IRAs and 401(k)s, but is not applicable to the original owners of tax-free accounts, such as Roth IRAs. Additionally, if you have yet to retire, you can likely defer RMDs from your employer’s retirement plan until you leave the workforce.
The April 1 deadline is an extension of the normal December 31 requirement; however, individuals making the withdrawal for the first time are given a few extra months. (Remember: this does mean that should plan to take another distribution by the end of this year. If you’re turning 70 1/2 in 2015, you can avoid taking and facing taxes on two distributions in the same year by taking your first RMD before the end of 2015.)
The IRS offers worksheets to assist you in determining your RMD. You must calculate an RMD for each individual account; however, if you invested in multiple traditional IRAs, you can withdraw the total distribution (i.e. the sum of the RMDs for each individual IRA) from a single account.
If you choose to adjust your budget or spending habits with these incoming distributions in mind, remember that they will still face income tax on the amount withdrawn.
For those still making contributions to their retirement accounts, April 15 is the deadline to make tax-deductible contributions that fall under the 2014 tax year. The maximum contribution allowed in 2014 is $5,500 if you are under the age of 50 and $6,500 if you are over the age of 50.
Should you have any questions about these upcoming deadlines, don’t hesitate to contact us. We would love to assist you in navigating and enjoying your retirement.
