A report from the Treasury Inspector General for Tax Administration urges the IRS to “proactively” contact taxpayers about this, writes Forbes editor Ashlea Ebeling.
“People are making mistakes, but they aren’t getting caught,” Barry Picker, an accountant in New York City told her. “The IRS wants people to comply, but they don’t want to penalize them.”
You have to start taking money out of your IRA in the year following the year you turn 70 ½, and that income is taxable unless it's a Roth IRA. The amount you must withdraw depends on the prior year-end balance in your IRA and IRS-provided life expectancy charts.
If it’s an honest mistake, you can make one withdrawal to cover all the misses and fill out IRS Form 5329 for a standard waiver of the 50 percent penalty on missed distributions, Ebeling explains.
Elsewhere on the retirement front, with stories abounding about how Americans have inadequate resources for a comfortable retirement, many of us in our 40s, 50s and 60s are wondering how much coin we'll need to enjoy our golden years.
Paul Merriman, founder of Merriman Wealth Management, a Seattle-based investment advisory firm, offers several issues to consider on that count. Among the questions you must ask yourself, he writes in a MarketWatch column:
- "If I could continue my current income for the rest of my life, adjusted for inflation, would that be enough to meet all my anticipated needs in retirement?
- "Is it OK with me to use up all my investments by the time of my death, or do I want to provide for others in my will?
- "Am I really able and willing to scale back my retirement lifestyle should my investment returns fall short of my expectations?
- How anxious will I be if I plan to have my retirement income vary from year to year depending on how well my investments perform?"