The 15th of April, the nationally known Tax Day, is the deadline for everyone to file their taxes. However, that is not the only deadline this year in April.
If you have money in a personal fund, such as an IRA, 401(k), Simplified Employee Pension, or other retirement account that involves rollovers, you may need to make a withdrawal soon.
Had a Birthday Lately?
According to the New York Times, if you turned 70 ½ in 2014 and have an IRA, April 1st, 2015 is the deadline to make your first withdrawal from the account. If you do not take your required minimum distribution by that time you will face a penalty.
The penalty is not a minor one, either. The fine is a tax worth half the amount of money you were supposed to withdraw. So for example, if you were to scheduled to make a first withdrawal of $5,000 but failed to withdraw, you would owe a tax of $2,500.
The amount of your required minimum distribution is calculated as the value of your account divided by the years of your life expectancy.
Required Minimum Distribution Deadline: April 1st
This April 1st deadline is only for initial withdrawals. The annual mandatory withdrawal deadline is December 31st, but waiting until April may cause to you have to make two withdrawals in a year, which could place you in a higher tax bracket.
The IRS, in a discussion of retirement said: “You cannot keep retirement funds in your account indefinitely.” According to Fidelity Investments, this is in response to the fact that 59% of investors had not withdrawn the required amount from their accounts as of December 26 2014, and 43% had not taken withdrawals at all.
One possible way to avoid missing the deadline or facing a penalty is by setting up regular automatic withdrawals of smaller amounts, since the required amount doesn’t have to be taken all at once.
We are here for all your federal employee retirement questions!
At Medallion Financial Group, we believe financial planning is about Family. We have been helping families invest in the future since 1987 through a holistic planning approach. We recognize there are a variety of needs when it comes to retirement planning, plan rollovers, annuities, college planning, life insurance options, and investment management. It is easy to get lost in a sea of choices. Our financial advisors help with the basics and beyond to enable our clients to get the education, advice and management they need to retire with confidence.
Our focus is twofold: first and foremost, we are fiduciary advisors. We stand against any violation of laws, values, and ethics. Second, we treat our clients as part of our family, not only those who call Maryland and Georgia home, but clients across the US who have benefited from our reputation of personal service, integrity, and expertise.
We strive to exceed client’s expectations – because we have high expectations of ourselves.