You are probably familiar with the tax benefits of putting money into a traditional IRA. And you may know about the 10% penalty for taking an early withdrawal. But did you know about the enormous penalty for not taking out required amounts?
Generally, you must begin withdrawals no later than April 1 of the year after you turn 70½. The required amount is based on the value of the account on January 1 and on your age. The IRS publishes a table that is used to compute the actual dollar amount each year based on these factors.
Failure to take out sufficient money when required will result in a whopping50% penalty.
Other rules will apply if you inherited the IRA, if you are the spouse of the decedent, and if the decedent had already started making withdrawals. The rules can be complex and the cost of an error can be huge. To be safe it’s best to consult an expert. Mentor can help make sure you meet this requirement.