Before the age of 59 1/2, if you take out money from a traditional IRA, your distribution will be fully taxable. In addition, they will be subject to an additional 10% penalty tax. There may be ways this penalty can be avoided. For further detail please contact one of our professionals.
It is also important to name beneficiaries as it will determine who will get what with the remaining amount in the account after your death. Not only is this vital to assure your estate planning objectives but the decision may affect the minimum amounts you must withdraw from the IRA when you reach age 72.
Once you reach age 72, you are required to take distributions from the IRA. Consequently, if you don't start to take distributions you will have to pay a 50% penalty tax on what should have been paid out.
Under current rules, you need to make your initial Required Minimum Distribution (RMD) for the year in which you become age 72. For the first RMD only, the distribution can be postponed until April 1 of the following year.
If you are employed and contributing to your company's retirement plan, RMDs do not apply to that particular account until you retire.
For expert guidance on traditional IRAs please contact our office.