Compulsory IRA Withdrawls By Age 70 1/2

Know a relative of a friend who has blithely ignored this rule without being detected, for more than a decade . . . penalties are severe (50% excise tax! Jeez . . . ). Anyone with experience in this area?

 

Paging spnited.

 

A little more explanation of where you are coming from here?

 

You don't start pulling IRA withdrawls by age 70 1/2, there's a severe excise tax in your future, if you're caught.

I have a friend who has an elder who didn't start withdrawing until SEVERAL years after the 70 1/2 threshold.

Curious as to any literal consequences . . .

 

So, take it out by 70 1/2 and put it into a money market, you're saying?

 

Best off the record advice is lay low and stay quiet about not taking timely distributions.

Also recommend taking out slightly more than the minimum distribution for 2008 and continue the practice from this point foward.

If caught, plead ignorance and be prepared to face consequences.

 

You get caught screwing the federal government out of money, someone's going to pay -- either the owner of the account or their estate. Uncle Sam doesn't take kindly to this.

 

My dad has something like 1/16th withdrawn every year and put into a money market.

The good news is, 11 years after turning 70 1/2, his original amount is almost 100 percent what it was . . . plus the 11/16ths added to the MM account.

 

My grandfather didn't take his out for a couple of years after he turned 70 1/2. He was detected, told he'd have a huge tax hit on it unless he gave it away as a gift. All the grandchildren got large mutual funds.

 

That's great, in terms of money management. He is to be commended, for he shall never, ever have to eat dog food like some old folks on fixed incomes.

But at age 81 or whatever, doesn't he want to start spending -- or gifting or donating while he's still around to enjoy the role and the results? Just leaving behind a pot of money after one has departed isn't much fun.

It's almost like most of us are hard-wired one way or the other: Spenders who don't know how to save or savers who don't know how to spend.

This is only my opinion, of course, but it's the same one I'd have if my dad still were around: Here's hoping the old guy breaks some dough out of the accounts and takes an extra cruise this year. Or buys BTExpress a convertible with it while he can mooch a bunch of rides and brag to his friends.

 

Some most-helpful stuff, thus far. Additional input welcomed.

 

He amazes me. Never made more than $35,000 a year in a one-income household, put three kids through college, pays for Nursing Home insurance (in case of that financially draining emergency), yet still has more than $100,000 squirrelled way.

Of course, it helps that he has zero material wants. Unlike anyone I have ever known.