Can I Take My Ira Money Out To Invest Elsewhere On My Own

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Nov 10, 2021, 08:45am EST |

When You're Required To Pull Money Out Of Your Retirement Plan

John F. Wasik

I am an author, speaker and journalist specializing in investor and consumer protection.

Did you know that once you reach a certain age (72), the IRS requires that you pull money out of most of your conventional IRA retirement plans — if you already haven't done so?

That's right. So-called "Required Minimum Distributions (RMDs)" don't let you keep money in your Individual Retirement Accounts (IRAs) forever. You may have to plan for this with your tax accountant or financial planner if it's not on your radar screen.

This rule applies to conventional IRAs, 401 (k)s, 403 (b)s, SEP-IRAs and SIMPLE Plans. It doesn't apply to Roth IRAs and 401(k)s, which carry a different set of rules.

Here is the basic rulebook for RMDs, courtesy of Legacy Retirement Solutions:

Depending upon the terms of the specific retirement plan, RMDs must begin to be withdrawn by April 1 of the year following the later of: 1) the year you attain age 72; or 2) the year you retire, provided you are not a 5% or greater owner of the business.
For years after the initial RMD is made, the requisite RMD amount must be withdrawn by December 31 of each year. This includes the calendar year after an individual attains age 72, even if the first RMD is withdrawn during that same year.
If an RMD is not withdrawn by the applicable deadline or is withdrawn in less than the full required amount, the amount not withdrawn is subject to a 50% excise tax.

Although Congress gave everyone a break by extending the RMD deadline to age 72 (it used to be 70 1/2), you still need to look ahead. It may seem strange that you will pay a penalty for keeping money in your retirement kitty, but a fee-only financial planner can help you make better decisions.

(Photo by Yavuz Arslan/ullstein bild via Getty Images)

ullstein bild via Getty Images

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John F. Wasik