Are you one of the many retirement account holders who took a mandatory distribution this year? If so, you may be able to manage the taxes associated with Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s. There are some essential details to keep in mind, however. Here’s what you need to know.
Don’t forget the withholding
Avoid the 6%
It pays to be sure
1. IRS.gov, 2020
Distributions from Traditional IRAs, 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. The change in the RMD age requirement from 70½ to 72 only applies to individuals who turn 70½ on or after January 1, 2020. Once you reach age 72, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in most circumstances. Workers over 72 can still contribute to an IRA, 401(k) or other retirement accounts, depending on specific circumstances.
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