When Do You Have to Withdraw Money From an IRA at 72?
Individual retirement arrangements are tax-sheltered accounts that allow individuals to save up to a specified amount each year and designate it for retirement. Because of the significant tax benefits, the Internal Revenue Service established penalties for early and late withdrawal of funds. You cannot defer taxation on the accounts indefinitely.
Other People Are Reading
-
Mandatory Withdrawals
-
Though individuals are penalized for taking IRA withdrawals prior to age 59 1/2, taxpayers may also be penalized for taking withdrawals after a certain age. Under federal tax law, you are required to start distributions from your IRA by April 1 following the year you turn age 70½.
Penalties
-
If you fail to take minimum distributions from your IRA, you may be assessed an excise tax. Excise taxes are equal to 50 percent of the required distribution.
-
Taxation of Withdrawals
-
You will be taxed on the distributions you receive from your IRA in the year the withdrawal is made. The amount you receive is included in your gross income.
Roth IRAs
-
Roth IRAs are funded by after-tax contributions. With a Roth IRA, unlike traditional IRAs, there is no requirement to begin taking distributions at a specific age because taxes have already been paid on contributions to the account.
Contributions
-
The amount you may contribute to an IRA is limited each year and is adjusted annually for cost of living increases. You may make additional contributions if you are over age 50. These are called catch-up contributions, and for tax year 2009, the catch-up limit was $1,000 in addition to the maximum annual contribution of $5,000. You are not allowed to contribute to your traditional IRA after you reach age 70½.
-
