If you’re age 70½ or older, you’re required to withdraw a minimum amount each year from your IRAs and employer-sponsored retirement plans, excluding Roth accounts. Failure to take this year’s required minimum distribution (RMD) before 4 p.m., Eastern time, on Tuesday, December 31, 2013, could result in a stiff IRS penalty—50% of the amount you were supposed to withdraw.
There are some exceptions. For example, if you’re age 70½ or older and still employed, you may be able to delay RMDs from your workplace retirement plan. Also, when you reach age 70½, you may have until April 1 of the following calendar year to take your first RMD payment.
Be aware that you must take RMDs from IRAs and employer plans separately—you can’t combine the total required amount and take a distribution from only one account type. (Contact your plan administrator for details.) And if you’re planning to roll over assets from an employer plan or convert from a traditional IRA to a Roth IRA, you must take your RMD first.
Use your RMD wisely
If you don’t need the money for day-to-day living expenses, you have several other options for your RMD. You could pay insurance premiums, use it as a charitable contribution or a gift toward a child’s education, or reinvest the money in a nonretirement account.