End of the Year Retirement Plan To-do List

As the end of the year approaches, if you have 401(k)s, IRAs, and the like, here are a few things to keep in mind.

You must take your required minimum distribution from your IRA for the year in which you turn age 70.5. However, you can delay the first payment until April 1 of the following year in which you turn 70.5. For all subsequent years, you must take the required minimum distribution by December 31. Please see the IRS’ Retirement Plans FAQs regarding Required Minimum Distributions.

Beneficiaries that inherit an IRA from a decedent must take the Required Minimum Distribution by December 31. Ask the trustee if the account distributed the required minimum while the account owner was alive. Be sure to use the correct table to calculate the required distribution, IRA are based on what’s called the single life table.

Failure to take the required penalty may result in a 50% penalty on amounts that should have been distributed.

If you fail to take the required minimum distribution, immediately take them. Then file Form 5329 to report the penalty. Enter “0” for the additional tax penalty and send the IRS a letter requesting waiver of the penalty.

Please see the IRS’ Required Minimum Distribution Worksheets.

Take your required distribution from your 401(k). According to the IRS, the required beginning date is April 1 of the first year after the later of the following years: 1) Calendar year in which the participant reaches age 70.5. 2) Calendar year in which the participant retires. Please see the IRS’s 401(k) Resource Guide – Plan Participants – General Distribution Rules.

Additional Tips:
-Update the beneficiary designations on all your qualified retirement plans.
-Contribute the maximum– especially if there’s a match.
-Check the status of all your retirement accounts.


Posted by Theodore H. Waggner, Esq., Associate Editor, Wealth Strategies Journal