Congratulations, you will be 72 this year. You probably realize that you will be asked to start taking money out of your IRA’s this year. Yes, that IRS regulation that most Senior Citizens hate with a passion. You have to take money out (not Roth IRAs of course) and pay tax on it. Ordinary tax not capital gains. If you or your spouse are still working those percentages can climb. This procedure is called the Required Minimum Distribution. I call it the, “Ridiculous Mandatory Decimation”.
You are not alone this year in turning 72. Some other names you might know include Jill Biden, Mark Hamill, Phil Collins, Sting, Kurt Russell, Michael Keaton, Mark Harmon, Tony Danza, Nick Saban, Tommy Hilfiger, Pete Carroll and Cheryl Ladd.
We might remember some who were born in 1951 but have sadly passed away. Robin Williams, Dale Earnhardt, Luther Vandross and Rush Limbaugh.
If you want the actual regulations, I found out that the IRS uses Publication 590-B. The base amount to use is the total of your IRA’s and etc. as of December 31, 2021. The tax is calculated using numbers from tables in the above IRS code. They will give you a number each year. For example, your number will be somewhere around 24.4ish. You divide this number into your total dollar amount of retirement income. That translates to about a 4.1% distribution. You can access this information by clicking here.
One rule that some of you should know: If you are married to someone at least 10 years younger than you, there is another table that has a better number and you will not have to take out as much money each year. Of course, you can take more if you want, but you will be paying more tax.
BTW, there are charts for all ages. Even one for a person 105 years old who is married to someone 21.
How long does this keep going on? Until the money is all gone or you die. Welcome to our club. I have been a member for many years and I do not like this club at all. Oh, did I mention that if you do not pay the money in a timely fashion-by December 31st of the year due-the penalty is 50%. The first year you get a few extra months.
BTW, to me professional tax advice is given by Tax Attorneys, Certified Public Accountants, and Enrolled Agents. I do not know if I would trust H&R Block or Tara from Intuit. This is not just something that is here one day and gone the next. You might want to get some good professional advice. I have found many so called experts do not know all the nuances of Publication 590 B. I sure as heck do not and I want out of this group.