AboutWillard R. Brumbaugh, LUTCF Expertise I have answered many questions regarding 401ks, IRAs and annuities as well as life insurance.
I have been counselling against most Qualified Plans since 1994.
Experience Ranked in the top 5 in retirement catagories at Askme.com most of its last 2 1/2 years. Organizations I belong to:
National Association of Insurance and Financial Advisors-California
Inland Empire Estate Planning Council
Education/Credentials Life Underwriters Training Council Fellow
Question QUESTION: My husband turned seventy in October of 2008, I think his first distributions on his IRA would have been due this past April (2009) but then the president gave everyone a year of grace. When will my husband have to withdraw his distributions in 2010 and pay taxes on them?
ANSWER: Dear Lee,
It looks like you have until April 2010 to start the withdrawals. But if this conforms to previous rules, he would have to take two RMD distributions in 2010. Unless you are in a high tax bracket, I don't see any advantage in postponing distributions.
However, depending on where he has the IRA, he may want to look at options as to what level of safety he may desire, and what products would conform to his level of risk tolerance.
Willard R. Brumbaugh, LUTCF
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QUESTION: My husband's IRA had gone down over a third after the stock market fell in 2008 and we felt that taking the year grace period was a good idea. I didn't realize he would have to take two distributions in 2010 and I don't think he is aware of it either. I don't know anything about distributions. My understanding is that you have to sell so much of your
IRA and pay taxes on it. So, evidently next year, we will have to sell
double to what we would have had to if we had gone ahead and taken the distribution this year. Since he turned seventy and one half in April of this year, when would his first distribution have been due?
Answer The rule is the first distribution must be no later than the calendar year following the year that one became 70 1/2 by April of the then current year. But as stated before, that would necessitate two RMD distributions in that year.
If you feel that the market is due to rise you might want to move the entire amount out now so as to avoid paying more taxes later. If you were to transform your IRA to a Roth IRA all future gains would be tax-free.
