4 Crucial IRA Tips

Dec 17, 2015 by

calendarYeah, I know: we’re all wound up in the holidays and our IRAs are the furthest things from our minds. Just flag this post in your reader, then have a look on, say, December 28th. Then look again in March.

4 Crucial Year-End IRA Reminders

1. Take Your Required Distributions

Are you age 70-1/2 or older? Then you must take from your traditional IRA a “required minimum distribution,” or RMD. (There’s no such rule for Roth IRAs.) Unless you turned 70-1/2 in 2015, you must take that RMD by December 31, 2015. That’s just two weeks away! If you turned 70-1/2 in 2015, your deadline for taking a RMD is April 01, 2016. What happens if you don’t take a proper RMD? The IRS will slap a 50% “excise tax” on the amount you failed to take out. Yikes!

2. Don’t Contribute More Than Allowed to Your IRA

Here’s another opportunity for an IRS body slam: Contribute more to your IRA than the 2015 contribution limits and you’ll be hit with a 6% tax on the excess.

3. Do Contribute Up to the Limit!

An IRA is a beautiful thing, if one of your ideas of beauty is a secure retirement. Of course you have to put money in to reap the substantial benefits! In general, for 2015 (and 2016) your total Roth and traditional IRA contributions cannot exceed $5,500, unless you’re age 50 or older (yippee!). We oldsters get to put in another $1,000 for a total of $6,500. Remember: the deadline for making a 2015 IRA contribution is April 18, 2016!

4. IRA Distributions and Your Premium Tax Credit

Your year-end IRA distribution increases your income and may make you ineligible for the Premium Tax Credit. You need to factor that possibility into your calculation of how much distribution to take so you don’t shoot yourself in the financial foot. No way around doing the math here, sorry!

Nothing here you need to think about until after December 25th. Happy holidays!



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