- If you are older than 70 1/2, you generally must take the annual required minimum distribution, or RMD, from traditional IRAs and 401(k) savings plans. Meeting the deadline is critical. If you miss it, you'll be subject to a tax penalty of 50 percent of the amount you failed to distribute on time. That's a mistake no one can afford to make. Fidelity Investments, the nation's largest provider of 401(k)s, recommends that you set up an automatic plan to manage required distributions, so that next year you won't be in a last-minute rush. "Failing to take an RMD can defeat one of the main advantages of investing an IRA in the first place -- to help reduce taxes," said Lauren Brouhard, senior vice president, retirement, for Fidelity Investments, in a prepared statement.
- Unless Congress makes a change, this is the last year you can donate up to $100,000 tax- free from your IRA in lieu of making an RMD. You benefit -- there will be no income taxes on the money, which can keep you in a lower tax bracket overall -- and the charity benefits, too. You can do this even if you take the standard deduction, but the transfer must be made from trustee to trustee.
- Make sure you have fully funded your 401(k). It is especially important to contribute enough so that you get the full employer match. While your employer probably doesn't match the whole potential contribution, workers can contribute up to $17,500 in 2013, plus an additional $5,500 if they are age 50 or older. If you work for a big company that uses an outside payroll service, it may already be too late to increase your contribution for 2013. But if your employer handles payroll in-house, you could still be able to adjust your final contribution. If you know you haven't contributed enough, it pays to ask. There's no point in leaving money on the table.
3 looming retirement deadlines
By Jennie L. Phipps · Bankrate.com
Sunday, December 22, 2013
Posted: 6 am ET
Add a comment
(Comments may take 5-10 minutes to appear)