This year is a major one for millions of baby boomers as turning 70 stipulates they take their first required minimum distribution (RMD) from their individual retirement account and 401(k) accounts and pay taxes on it. Bloomberg staffer Lewis Braham reports on the on this year featuring the largest population of first-timers taking their minimum distributions ever.
Boomers who do not comply with this rule face a 50% penalty, that can be waived if done properly. However, there are other tough financial decisions to be made for boomers such as whether or not to wait to collect social security benefits:
Still, delaying the payouts can raise thorny tax issues. “Once you hit 70½, you’re really out of the sweet spot of tax planning, because you’re forced to take distributions and Social Security,” says Bob Morrison, a financial planner at Downing Street Wealth Management near Denver. Receiving too much money at once can knock you into a higher income tax bracket or deprive you of deductions.