Avoid the Required Minimum Distribution Penalty
It’s that time of year again. Required Minimum Distributions (RMD) from an IRA need to be calculated and sent out by the end of the year. If you are 70 ½ or older this year with an IRA account(s) it is time to make sure your RMD is being taken care of. (If you are 70 1/2 this year your RMD can be delayed until April 15, 2014.) You may be thinking that this is done automatically, and in many cases it is, but the burden is really on you to make sure you get it and that it is correct. In fact the penalty if you don’t take an RMD is pretty severe. You will pay 50% of the amount of RMD you did not take out, as a penalty. And you will still need to take the full amount out and pay taxes on it.
If you have money in an IRA, especially in several places you may not be able to count on the IRA custodian to make the distribution on their own. They may not even realize that you have other IRA accounts. It’s very easy for the RMD to be forgotten as I’ve seen too many times.
So, how do you make sure that the distribution is handled properly? One way is to contact the custodians of each of your accounts and tell them to calculate the amount for the account under their control and send you the money. You can also give one of the custodians the total value of all your IRA accounts as of last December 31 and ask them to calculate the total RMD. Then you can take the amount out of one account. If you can’t get cooperation from the custodian you can always ask a financial advisor or accountant to do the calculation for you. The important thing is that you make sure it gets taken care of so YOU don’t have to pay the penalty. But don't wait until the last minute. It may take a couple of weeks to get your check. TC