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Confused about IRA withdrawals between 59.5 and 70.5
12-13-2012, 03:55 PM
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#1
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,140
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Confused about IRA withdrawals between 59.5 and 70.5
A coworker told me that once you start taking money from an IRA/401k, you MUST take distributions each year, going forward.
I can't find anything to confirm that - just a lot of stuff about RMD's once you reach 70.5yo.
Example: retiree is 61 and has an unexpected expense. For cash flow reasons they'd like to pay for that expense from IRA or 401k money. Since the person is over 59.5 - they can access the tax deferred money penalty free. Obviously, they'd be paying taxes on the withdrawal.
Does this trigger mandatory withdrawals for following years?
I think my coworker is wrong.. but I'd like to know if he's right, and I'm wrong. This will make a difference in our spend-down plans.
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12-13-2012, 03:56 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
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Your co-worker is wrong.
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Numbers is hard
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12-13-2012, 04:02 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,545
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after 59 1/2 you can withdrawl without penalty (other than the taxes you owe). It does not trigger mandatory withdrawls for following years.
Mandatory withdrawls must begin at 70 1/2 and then occur yearly based on life expectancy at the time you turn 70 1/2.
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FIRE'D in July 2009 at 51...Never look back!
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12-13-2012, 04:04 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by REWahoo
Your co-worker is wrong.
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+1
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12-13-2012, 04:08 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,149
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A co-worker told me that listening to financial advise given by co-workers is the leading cause of inadequately financed retirements today. If a co-worker told me, it must be true!
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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12-13-2012, 04:10 PM
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#6
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,140
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Thanks.
Part of my confusion about this came from an article that stated
Quote:
(Tax rules require that once IRA withdrawals begin, they must continue.)
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Coping with the financial toll of terminal illness - Dec. 13, 2012
That quote fails to mention that this is ONLY true if it's an inherited IRA/401k... different rules for inherited retirement accounts.
(The article is the follow up article to the one being discussed about end of life decisions/costs.)
I need to stop confusing myself. I was pretty sure I was right by so was my coworker (convinced he was right).
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12-13-2012, 04:11 PM
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#7
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,140
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Quote:
Originally Posted by youbet
A co-worker told me that listening to financial advise given by co-workers is the leading cause of inadequately financed retirements today. If a co-worker told me, it must be true!
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Too true.
Same with financial advice from relatives. Or worse - financial advise from relatives based on something *their* coworker told them.
LOL
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12-13-2012, 05:01 PM
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#8
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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Moral: Never get your financial advice from a cow orker.
It's bad enough the poor cows have to put up with it; there's no reason you should.
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I thought growing old would take longer.
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12-13-2012, 05:36 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,684
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I wonder if your coworker is confusing the rules for a 72-T distribution (which apply if you want penalty-free access to IRA funds before 59.5) with distribution rules that apply after 59.5.
What you were told is not so.
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12-13-2012, 06:34 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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Quote:
Originally Posted by Rustward
I wonder if your coworker is confusing the rules for a 72-T distribution (which apply if you want penalty-free access to IRA funds before 59.5) with distribution rules that apply after 59.5.
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+1
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"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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12-13-2012, 07:57 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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Quote:
Originally Posted by rodi
Too true.
Same with financial advice from relatives. Or worse - financial advise from relatives based on something *their* coworker told them.
LOL
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I hear you. 2 of my BILs sell life insurance and annuities.
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12-13-2012, 08:50 PM
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#12
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Full time employment: Posting here.
Join Date: Dec 2010
Posts: 576
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The RMD starting at 70.5 years old will be slightly less than 4% of the total asset within that IRA, so if you use the 4% rule, the RMD is automatically accounted for.
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12-14-2012, 10:07 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Charleston, SC
Posts: 13,566
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Quote:
Originally Posted by Rustward
I wonder if your coworker is confusing the rules for a 72-T distribution (which apply if you want penalty-free access to IRA funds before 59.5) with distribution rules that apply after 59.5.
What you were told is not so.
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This is exactly what the guy was talking about, I bet. Those do have to continue. The 72T is the Substantially Equal Periodic Payments dealie.
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12-14-2012, 03:55 PM
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#14
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Recycles dryer sheets
Join Date: Oct 2011
Location: Upstate Ruralia
Posts: 356
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Rodi how old are you?
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12-14-2012, 04:35 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Apr 2006
Posts: 1,684
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Quote:
Originally Posted by Sarah in SC
This is exactly what the guy was talking about, I bet. Those do have to continue. The 72T is the Substantially Equal Periodic Payments dealie.
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If I understand correctly, the 72-T distribution can be stopped after age 59.5 AND the distribution has been taken for a minimum of five years.
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12-14-2012, 06:15 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 4,172
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Quote:
Originally Posted by bondi688
The RMD starting at 70.5 years old will be slightly less than 4% of the total asset within that IRA, so if you use the 4% rule, the RMD is automatically accounted for.
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but only for a few yrs?
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