At the really odd age of 70 and ½ years old, a peculiar rule kicks in regarding retirement accounts. There’s something called the RMD, the required minimum distribution. That means that you must withdraw certain amounts from your retirement account every year or face tax penalties. Additionally that money that you withdraw is regarded as ordinary income, which may complicate your financial situation.
If you’ve reached 70 and you don’t feel like you need to start withdrawing money right away, there are a couple of things that you can do with the help of a financial planner or accountant.
First, you may be able to donate money directly from your retirement account to a charity of your choice, allowing you to write off the additional income.
Second, you do have the option of postponing your first withdrawal until April 1st of the year following your “70 ½” birthday.
Another thing that you should do is keep a careful watch on the different kinds and number of retirement accounts that you have. There are different RMD rule requirements for different kinds of plans, and some plans may require individual calculations. IRAs, including SIMPLE or SEP IRAs, allow you to take the distribution from one or more of your accounts. However, if you have an IRA and a 401(k) plan, you need to take separate distributions from each of them.