Michael on April 22nd, 2009
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In response to the market turmoil Congress recently passed a one-year waiver on RMDs.

You: What are RMDs?

Required minimum distributions.

You: That didn’t help.

Shortly after you reach 70 1/2, you must begin to take a proportion of your money out of your qualified retirement plans annually.

You: Or?

You pay a penalty.

You: What if I don’t want to take the money out, since it’s better to save my money longer?  Can I just pay the penalty?

The penalty is a 50% extra tax, so it’s never a good idea to ignore the RMD.  Still, you are only required to take the money out of the account, not to actually spend it.

However, retirees can skip their 2009 RMDs thanks to the previously mentioned Congressional action.  While the waiver sounds simple, in practice it’s not.  I wrote a summary article about the 2009 RMD waiver implications and opportunities at the About.com web site, where I guide the Retirement Planning channel and blog.  If you or your loved ones are 70 1/2 or older, make sure you take a good read.

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