Posted on 26 March 2012
By Mark Miller
Seventy may be the new sixty — but not where the Internal Revenue Service is concerned. People who turned 70-1/2 last year must begin taking required annual withdrawals from their tax-deferred retirement accounts no later than Friday. Yet it seems that some of these seniors didn’t get the memo.
Fidelity Investments reports that nearly half (48 percent) of its IRA customers who hit the magic number in 2011 hadn’t yet taken their first Required Minimum Distributions (RMDs) as of late December. That percentage was up slightly from 2010, when 45 percent hadn’t taken RMDs by that time.
RMDs must typically be taken by December 31 each year; except for the year in which you turn 70-1/2, when you have until April 1 of the next year. The effective deadline for 2011 RMD first-timers is coming up fast. Since April 1 falls on a weekend this year, account owners will have to make their annual required withdrawals by March 30th.
Many seniors dislike taking RMDs, since the withdrawals are taxed at ordinary income rates. But failure to comply is even more painful: you’ll face a whopping 50 percent penalty on whatever funds should have been withdrawn in a given year.