William Penn Life, 2000 (35. évfolyam, 1-12. szám)
2000-04-01 / 4. szám
Retirement plan distributions What you need to know THAT’S A QUESTION YOU MAY not have asked yourself very often, if ever. But, it's one you should ask yourself at least once a year. We can’t stress enough the importance of regularly checking the beneficiaries listed on your life insurance policies. It is the only way to ensure that the people you want to receive the benefits of your life insurance are the ones who will receive it Think about the changes that have occurred in your life since you purchased your life insurance. Getting married, having children, losing a loved one, gening divorced, getting remarried--ail these life changes affect your responsibilities. Do the beneficiaries currently listed on your life insurance policies reflect such changes? If you think you need to update the beneficiaries listed on your policies-either primary or secondary beneficiaries-contact your WPA representative. Or, call our Home Office toll-free at 1-800-848-7366. from the CPA Client Bulletin The tax treatment of amounts you receive from different types of retirement plans can vary depending on when you receive the amounts and the type of retirement plan. It's important to know the rules regarding distributions so you can plan your distributions and rollovers and avoid unnecessary taxes and penalties. The rules regarding retirement plan distributions are extensive and sometimes confusing. Here, in brief, are some of those rules as they apply to a few of the common types of retirement plans. IRAs Generally, you must include in your gross income distributions from a traditional IRA in the year you receive them. A traditional IRA is any IRA that is not a Roth, SIMPLE or education IRA. (Exceptions to the general rule are rollovers, tax-free withdrawals or contributions, and the return of nondeductible contributions.) Premature Distributions. Generally, premature distributions (early withdrawals) are amounts you withdraw from your traditional IRA accountor annuity before you are age 59)4, or amounts you receive when you cash in retirement bonds before you are age 59)4. You must include premature distributions of taxable amounts in your gross income. These taxable amounts are also subject to an additional 10 percent tax unless the distributions qualify for an exception. Distribution After Age 59Vi and Before 70Vl After you reach age 59)4, you can withdraw assets from your traditional IRA without having to pay the 10 percent additional tax. Even though you can make withdrawals, you don't have to withdraw any assets from your IRA until you reach age 70)4. Required Distributions. If you are the owner of a traditional IRA, you must withdraw the entire balance or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70)4. If distributions from your traditional IRA are less than the required minimum distribution for the year, you may have to pay a 50 percent excise tax for that year on the amount not distributed. Other Retirement Plans SIMPLE IRA Plans. An early withdrawal from a SIMPLE IRA is generally subject to an additional 10 percent tax. However, if the distribution is made within the first two years of participation in the SIMPLE plan, the additional tax is 25 percent. Annuity Contracts. If an early withdrawal from a deferred annuity is otherwise subject to the 10 percent additional tax, a five percent rate may apply instead. A five percent rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract, if, as of March 1,1986, you had begun receiving payments under the election. Tax on Excess Accumulation The IRS want to make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death. Therefore, the IRS may impose a tax on "excess accumulations." That's why the payments you receive from qualified retirement plans must begin no later that your required beginning date (unless the rule for five percent owners and IRAs applies). This is April 1 of the year that follows the later of: (1) the calendar year in which you reach age 70)4, or (2) the calendar year in which you retire, pfl Copyright (c) 2000, American Institute of Certified Public Accountants, Inc. Jersey City, N.J. 4 Williii fen Lile, April 2000
