Unlimited Access. Try it Today! Your First 10 Days Always $0.99

Money

Business Money

Get a reprieve for distributions from retirement accounts

Older savers get a one-year reprieve in 2009 from having to take distributions from retirement accounts because of the recent stock market turmoil.

This helps if you don't need to dip into a traditional IRA, 401(k), 403(b) and 457 plans to live on. You can leave the money untouched, where it may recover from last year's losses.

Mandatory distributions from these accounts kick in after you turn 70 1/2. (If you're still working, you don't have to pull money out of your employer's 401(k), 403(b) or 457 plan.)

The minimum amount that you must take out annually is based on a formula using the account balance from the previous year. So, the 2008 distribution was tied to account balances at the end of 2007, when the stock market was much higher. Many retirees last year discovered they had to make bigger withdrawals than they wanted and were forced to sell investments when the stock market was going through its worst year since the Great Depression.

The suspension applies to older investors as well as younger beneficiaries who inherited an IRA and also must make annual distributions, says Ed Slott, an IRA expert.

The relief won't help retirees who have no choice but to take money out of retirement accounts to live on.

Also, if you turned 70 1/2 last year, your first mandatory withdrawal must be made by April 2009. You will still have to take that distribution this year if you haven't done so already, despite the 2009 suspension. That's because that first distribution is considered a 2008 withdrawal, not a 2009 distribution, Slott says.

Discuss this story and others in our talk forumsMost recent business talk forum topics:More news talk forums: Local | Nation/World | Business | Health/Science | Computers/Technology
Note: In-story commenting has been temporarily disabled due to technical issues. We are working to correct the issue and will bring back this feature in the future. In the meantime, please use our talk forums to discuss stories.

Discuss this story and others in our talk forumsMost recent entertainment talk forum topics:More entertainment talk forums: Music | Restaurants | Television | MoviesNote: In-story commenting has been temporarily disabled due to technical issues. We are working to correct the issue and will bring back this feature in the future. In the meantime, please use our talk forums to discuss stories.

Copyright © 2015, The Baltimore Sun
Related Content
  • 50 tips for riding out the recession
    50 tips for riding out the recession

    Maximize your credit cards Grace periods amount to interest-free loans if you pay off full balance Save on auto insurance Lower your car insurance premiums with these useful tips Get the best available price Tips to avoid missing a sale or discount, even after purchase Recession-proof your job ...

  • Legg Mason quarterly profit up 20 percent
    Legg Mason quarterly profit up 20 percent

    Baltimore-based money manager Legg Mason reported earnings Friday of $83 million in the first three months of 2015, a 20 percent jump from the same period last year.

Comments
Loading

73°