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You Know You're Getting Old When You Get RMD Notice

Growing older is something everyone must face, even if it’s only one day at a time.  But what is old, and how do you know when you get there?  One way is when you get a notice that you have reached the year of your 70th birthday and must begin taking required minimum distributions from your 401(k) or other retirement plan or a traditional IRA account.  This is a wakeup call, and a shock, for some people.

Here is a typical notice from an IRA custodian.  Sent this year, it reads, “Federal tax law requires that you receive taxable payments from your traditional IRA every year once you reach age 70½.  These payments are called required minimum distributions (RMDs).  If the RMD is not taken, the IRS could assess a 50% excess accumulation penalty tax on the amount of the payment that should have been distributed but was not.  According to our records, you have a traditional IRA with us and will attain age 70½ in 2015.” 

Owners of Roth IRAs do not receive these notices because there’s no tax deduction for Roth contributions—that money already has been taxed—and withdrawals therefore are tax-free.

A woman who recently received a RMD notice called her IRA custodian and exclaimed that she was shocked into reality about her age when she received the notice.  “Even though I was of course aware of my age at one level, the notice shocked me into reality that indeed I am getting old.”  Although still working, she said she plans to retire after she takes her first withdrawal by April of 2016.  By law, RMDs may be taken as late as April of the year following the year a person turns 70½.

Now, back to the question of how old is old. According to statistics compiled by the Organization for Economic Cooperation and Development (OECD), whose membership is composed of 36 nations, the average man in the U.S. as of 2011 could expect to live to age 76.  Women in the U.S. the same year can expect to live to an average age of 81.

As far as longevity is concerned, the U.S. doesn’t fare very well when compared to other nations.  This country ranked No. 26 among the 36 OECD member nations, with an overall life expectancy for both genders of 78.7. 

That’s the bad news.  Now, here’s the good news: people are living longer as time passes. 

Here’s proof: according to statistics compiled by Infoplease, overall life expectancy in the U.S. in 2014 had moved up to 79.56 years.

Time is precious. Enjoy the rest of your life on earth. Proper retirement planning will help ensure your life’s enjoyment after you reach “old age.”

We are more than happy to assist with your planning.

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