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Help for the RMD challenged

By Jennie L. Phipps · Bankrate.com
Thursday, October 6, 2011
Posted: 4 pm ET

Here's more evidence that the retirement planning industry is figuring out that lots of us who are living on retirement savings -- or contemplating it -- need help.

If you have IRA accounts and are over age 70½, then you've had to deal with the required minimum distribution, or RMD, rules and know how complicated they can be. These IRS rules require  you to take money out of these accounts annually -- whether you need the money or not. If you fail to follow the rules, the IRS can penalize you as much as 50 percent. So getting it wrong can be expensive.

Fidelity Investments is introducing a way for its IRA customers to manage their RMDs. "We want to cut through the noise and complexity and make it much easier for our clients to know how much to take out, how much they've already taken out, and give them options for receiving the distributions," says Ken Hevert, vice president of personal retirement products.

The website also will include news updates about the latest regulations and such intricacies as how to manage RMDs as charitable contributions, avoiding the tax consequences. Through 2011, you can transfer up to $100,000 from an IRA to a qualified charity and that amount can be used to satisfy your RMD requirement for the year -- doing good reducing how much you have to give to Uncle Sam.

Hevert says more than 500,000 of Fidelity's customers are required to take an RMD this year -- and for 12 percent of them, this will be the first time. "These individuals have been focused on building a nest egg for the majority of their lives, and now they have this forced on them. Combined with market volatility and a big penalty if they don't get it right, this can be daunting," he says.

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