Consequences of liquidating an ira
You must begin making annual withdrawals, known as required minimum distributions (RMDs), by April 1 of the year following the year in which you turn 70 1/2. 31, by a withdrawal factor based on your age using the IRS uniform life table.
You can find this table in IRS Publication 590 or from your financial or tax adviser.
Pension plans are quickly disappearing in both the public and private sectors.
As a result, traditional Individual Retirement Accounts (IRAs) and defined contribution plans under Section 401(k) of the Internal Revenue Code (401ks) will most likely become the most significant assets in many estate plans.
The benefits of annuities are often overshadowed by their negative qualities—especially their notoriously high expenses and illiquidity.
While annuities make sense for some, they are not the best choice for everyone.
The exceptions for which you avoid this penalty include using the withdrawal to pay for qualifying medical expenses, college tuition, and up to ,000 toward the purchase of a first home for yourself, your child, or your parents. To find your RMD, you divide your account balance at the end of the previous year, which is typically Dec.
But be sure to review the exceptions to the 10 percent penalty (as detailed below) since your specific situation and use for the money may exempt you from being subject to the penalty.
No Penalty Exceptions: Simplified Employee Pension (SEP-IRA) The exceptions to the 10 percent IRS penalty rule are if the withdrawal was: 1.
You may begin to make withdrawals from a traditional IRA as soon as you turn 59 1/2.
Any earnings you've accumulated are taxed at your regular federal income tax rate.