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One Size Doesn't Fit All
Dear Jeff:
Could you outline the requirement for drawing down an IRA once I reach 70 1/2? It probably is somewhere out there on the Web but I haven't found it yet. Thanks, Jim Jeff Says:
Traditional IRAs and other contributory plans provide the investor with a tax deduction for the amount contributed that, in turn, lowers their tax bill.
However, Uncle Sam cannot afford to let investors keep money in their IRAs indefinitely.
Therefore, the tax code requires participants to take a distribution from their traditional IRA by April 1 of the year following the year s/he turns 70 1/2. This distribution must be taken whether or not the money is actually needed. Roth IRAs are not subject to the minimum distribution rules, so they provide the investor with greater estate planning advantages. Contributions can also be made to Roth IRAs after age 70 1/2, a characteristic not shared by its counterpart.
Determining the amount of the withdrawal is little more complicated. You indicate that you have not yet found information about IRA withdrawals on the Web. Well, you don't know how close you are. ThirdAge has provided calculators to help you determine the minimum withdrawal amount. I also refer you to an article my predecessor wrote on this issue.
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