As Oldest Boomers Turn 70, IRS Says Happy Birthday!
Category: Financial and taxes in retirement
July 20, 2016 — The oldest baby boomers, those born in the first post WWII year, are turning 70 this year. To which the IRS is probably saying, “Happy Birthday Boomer”, because the U.S. Treasury is about to get billions in tax presents. That’s about to happen because Required Minimum Distributions (RMDs) from your retirement funds are required in the year you turn 70 and 1/2. To do the math for you, if you were born in 1946 and your birthday is prior to July 1, you will be 70 and 1/2 in 2016.
If that describes your situation, you must start taking your annual Required Minimum Distribution (RMD) from your IRAs and 401(k)s. This year (the year you turn 70 and 1/2) you could wait until April 1, 2017 to take it, but if you do you will also have to take your 2017 RMD by December 31, 2017.
Comments on "As Oldest Boomers Turn 70, IRS Says Happy Birthday!"
Trout Chaser says:
A Qualified Charitable Distribution is an excellent idea, especially if you already donate to charity. Another idea that might be attractive for people perhaps 80 yrs old + may be an immediate Life annuity ( joint Life if married ). It may generate much more income than CD's because by law every payment is a combination of principal and interest and it lasts as long as your life or lives. And yes, if it's funded with an IRA, it too is 100% taxable as the income is received.
For example, a couple 80 yrs old today could receive an annual income of about $8700 on an investment of $100K. It also does away with the RMD requirements on the $100K. Food for thought!
Ed says:
Note of caution for first time RMD's, To take advantage off a Qualified Charitable Distribution (QCD) in the first year of your RMD, it must be take after you reach 701/2 and no earlier. I was surprises when I found this out earlier this week in a article in my local newspaper.
booch221 says:
Trout Chaser, while annuities are not subject to RMDs, you still have to pay the tax on $8700 annuity income. According to the Vanguard calculator, the RMD on a $100,000 IRA would be $5347, so a couple in the 25% tax bracket would pay $1337 in taxes. On a $8700 annuity distribution they would $2175.
Linda says:
Calculating the RMD is simple--your brokerage firm will do it for you. They can also set up an automatic plan to distribute it each year. Set it and forget it.
Louise says:
Do any of you participate in a Qualifying Longevity Annuity Contract (QLAC)? Was just reading about it on line and there seems to be some advantages but some financial people point out that it isn't all it's cracked up to be.
Here is a pamphlet from Kiplinger's that explains it really well but doesn't discuss the downfalls. https://www.brighthousefinancial.com/content/dam/brighthouse-financial/public/pdfs/gib/GIB-Kiplinger-QLAC-Guide.pdf
I am in no way affilitated with Kiplingers. I am just presenting this as some understandable information.
This article points out how QLAC may or may not be such a great idea afterall:
https://www.kitces.com/blog/why-a-qlac-in-an-ira-is-a-terrible-way-to-defer-the-required-minimum-distribution-rmd-obligation/
I found the QLAC concept very interesting but putting ones money into an annuity to start using by age 85 seems a bit of a gamble too. You can add a beneficiary just in case you don't withdraw all of the initial deposit amount.