From 1 July 2016 the baby boomer generation is officially starting to turn 70.5 years old, the age at which they need to start withdrawing their retirement savings and pay the required tax.
Bulimba, Queensland -- (ReleaseWire) -- 07/03/2016 --Baby Boomers are starting to turn 70.5 on 1 July 2016. This is a turning point in the management of tax-deferred retirement accounts, as the IRS is now able to gather back some of the tax that has been shielded until now.
Implementing the Required Minimum Distribution has been anticipated for years by financial forecasters as being a significant change in the finances of older Americans. Many economic public figures, such as Harry S. Dent, have openly discussed that this could trigger a downward spiral in the US economy with financial impact felt around the world.
As tax-payers turn 70.5 years old the IRS will send a bill for the tax owing on earnings for the tax year. This will require each person to either withdraw the predetermined amount and pay taxes on it, or be automatically taxed on 50 percent of the amount that was to be withdrawn.
The IRS provides tables that can be used to determine how much must be withdrawn, or the tax that must be paid if money is not withdrawn. Individuals who are still working can continue paying into a company 401(k) if the company allows this.
It puts a huge responsibility onto each individual, with heavy penalties to be imposed if a retirement plan participant or IRA owner does not take out the appropriate amount from their account every year.
The amount of money that is being discussed is considerable, with many sources suggesting that tax-deferred accounts hold more than $14 trillion.
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