The Baltimore Sun


You don't have to tap your IRA this year in hopes that you can recover some of your Wall Street losses

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 701/2. (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.

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