A recent MoneyWatch article listed the 10 most common errors people make with their IRAs.
There were complex issues mentioned like titling and tax problems created by spouses who inherit retirement accounts and withdraw too much, too soon. Lots of things the majority of us will never encounter.
But, the number one mistake investors make with IRAs, and it affects a lot of unsuspecting retired folks, is not taking the required minimum annual distribution, RMD for short.
In fact, Fidelity Investments stated in a recent Journal article that 54% of their half a million IRA customers who are old enough to be required to take a distribution this year have done nothing to meet this IRS requirement.
It’s the first week of December and this has to be done before the end of the year or you face a really hefty fine.
How’s a 50% penalty sound? 50%!
That’s what the fine is for not taking the RMD.
If you turned 70 and a half this year, you need to get on the phone to your broker and get this done.
There is no way around this. The IRS already has your SSN, age and required distribution information, and in my experience they are the least forgiving people in the world. So don’t think you can play the play the “I didn’t know” card. It will not change a thing.
Do this today! If you’re not sure you fall into this category, call your broker anyway and make sure. It’s probably toll free, so why take the chance.
A 50% penalty is too much to leave to chance.