In the last few months, there have been several articles concerning IRA distributions. I thought the issues raised deserved your attention. First, in the May, 2013 edition of Wealth Management, there was information concerning required minimum distributions. In general, the rule is that owners of IRAs, SEPs, SARSEPs and Simple IRAs must take a distribution no later than April 1st of the year after turning 70.5. If you are still working and own less than 5% of the company, and the plan document and the IRS allow a delay, then you can continue to contribute to a 401k and not take a RMD. The April 1st date applies only to the year after clients turn 70.5. If you wait until April 1st, you will have to take two distributions in one calendar year—one by April 1st and another by December 31st. It may prove more beneficial, tax wise, to take a distribution in the year you turn 70.5 instead of waiting to April 1st of the following year. If you fall asleep at the wheel and fail to take the required distribution, the IRS penalty can be as much as 50% of the required amount. IRs form 5329 and a well written letter may prove to provide some relief if you slipped up. The required distribution at age 70 is slightly over 3.6% and increases slightly each year after that. If you have more than one IRA, you can take the RMD all from one or proportionately from all accounts.
In the June 20, 2014 Kiplinger Tax Letter, it was noted that bankruptcy creditors have access to inherited IRA’s. The Supreme Court gave three reasons for their ruling: the heir cannot make additional contributions to the IRA, the heir must begin to take distributions soon after the original owner’s death and the heir may liquidate the IRA anytime without penalty. In another discussion concerning inherited IRA’s, it was pointed out that IRA beneficiaries are set on September 30th of the year following the death of the IRA owner. Normally, heirs can take distributions over their lifetime. If one of the beneficiaries is not an “individual”, then the IRA has to be distributed within five years. Redeeming the non-individual beneficiary (a school or charity, for example) before September 30th will allow the individual beneficiaries to stretch their distributions over their lifetimes. This should result in less tax and more growth in the IRA.
Summer is winding down, as is the “wedding” season. For the last month or so, I have been hearing a song by Lee Brice, titled “I Don’t Dance”. My first thought was that this song fits me perfectly, since Beverly and most of my friends know that while I might want to dance, my talent level for this activity is underwhelming. As it turns out, this song has become one of the favorite “first dance” songs of the season. Goes like this: “I don’t dance, but here I am, swinging you around and around in circles. It ain’t my style, but I don’t care. I’d do anything with you anywhere. Yes, you’ve got me in the palm of your hand, cause I don’t dance. Love’s never come my way, I’ve never been this far cause you took these two left feet and waltzed away with my heart.” God also promises that He will do anything with you anywhere. Let Him take you into the palm of His hand and “waltz away with your heart”. An old Cursillo hymn goes: “I danced in the morning when the world was begun and I danced in the moon and the stars and the sun, and I came down from heaven and I danced on the earth. At Bethlehem I had my birth. Dance, then, wherever you may be; I am the Lord of the Dance, said he. And I’ll lead you all wherever you may be, and I’ll lead you in the dance said he.”
P.S. Football is not far away.
Although this information has been gathered from sources believed to be reliable, it cannot be guaranteed. This material is intended for informational purposes only and should not be construed or acted upon as individualized tax, legal or investment advice. FSC Securities Corp does not offer tax or legal advice. Securities, insurance and investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment advisor 3416 North Blvd, Alexandria, LA 71301, (318) 448-3201. The views expressed are not necessarily the opinion of FSC Securities Corporation.