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November 29, 2004 09:38 AM

No More IRA Leniency


Excerpt: Starting this year, however, the game is up. The institutions that hold your IRAs -- mutual-fund companies, banks, insurers, brokers, etc. -- are now obligated to report to the IRS annually whether you are required to make a withdrawal from your account during the calendar year. That notification will take place each spring, at which point your IRA trustee should send you a reminder, as well, that a withdrawal is required.


Have you made your required withdrawal this year from your IRA? For the first time, Uncle Sam is watching.

Most people are familiar with the rules regarding "required minimum distributions" from individual retirement accounts. Once you hit age 70½, you must begin making annual withdrawals from your IRA, based on your life expectancy. (The tables for making the calculations can be found in IRS Publication 590, Individual Retirement Arrangements, available at www.irs.gov/pub/irs-pdf/p590.pdf online)

As reluctant as you might be to begin withdrawals, the Internal Revenue Service is eager to start collecting taxes on all those dollars that have been sitting in your account. For years, though, there was a problem with the system, at least from the standpoint of the government, says Stephen P. Vitale, a certified financial planner and senior vice president at J.B. Hanauer & Co., a financial-services firm in Parsippany, N.J. The IRS didn't have a mechanism for determining whether IRA holders (and people who had inherited IRAs) actually were making the required withdrawals.

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Read all 23 posts in the same category of Retirement:

Bush Says Social Security Plan Would Reassure Markets - Dec 17, 2004
Are You Ready To Retire? - Dec 13, 2004
Last-Minute Retirement Planning - Dec 12, 2004
Small Change Adds Up To Big Savings - Dec 09, 2004
Bush To Borrow To Fix Social Security - Dec 07, 2004
Moving Smoothly Into Retirement - Dec 07, 2004
Get Healthy, Get Wealthy - Dec 06, 2004
Five Books to Retire By - Dec 05, 2004
Tax Policy Promotes Early Retirement - Dec 02, 2004
Fidelity Analyzes Pension Performance - Dec 02, 2004
Social Security COLA Increase Looks Puny - Dec 02, 2004
To Yield A Good Retirement, Get Real, And Work It Out - Nov 28, 2004
Social Security Reforms On The Way? - Nov 26, 2004
Some New Ways To Preserve Your Retirement - Nov 23, 2004
Living Trust Offers: How to Make Sure They're Trust-Worthy - Nov 22, 2004
How to Forecast a Lifespan - Nov 21, 2004
Be Happy, And Put Retirement Fears to Rest - Nov 21, 2004
Seven Ways to Stop Saying 'Oops!' - Nov 21, 2004
Retirees Don't Have to Be So Frugal: A Case for Withdrawing Up to 6% a Year - Nov 17, 2004
How to Avoid Living Like a Poor Student at Age 70 - Nov 09, 2004
What Social Security Might Look Like - Nov 09, 2004
Are You Retirement Ready -- Or Not? - Nov 03, 2004