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What to do if you miss taking an RMD

Three RMD to-do’s before the end of the year

The end of the year is full of deadlines for your financial matters. Here are three of the most important to-do items when it comes to taking your required minimum distribution (RMD) from a retirement account. If you’re at least 70 years old and have a retirement account, you should read over this list and make sure you’ve met RMD requirements to avoid a tax penalty. 1. Make sure that 2018 required minimum distributions (RMDs) for all IRA account owners who reached age 70½ prior to 2018 are paid out. IRA owners generally use the IRS’s Uniform Lifetime Table to find the life expectancy factor to calculate their required minimum distributions. There is an exception for people whose spouses are more than 10 years younger and were their sole primary beneficiary for the entire year. Those individuals will use the Joint Life Expectancy Table. There is a 50% penalty that applies when RMDs are missed, so be sure you don’t miss this deadline. 2. Verify that all 2018 minimum distributions for deceased IRA owners, if not taken by the IRA owner when alive, are paid out to the beneficiaries by year end. The year-of-death RMD is calculated as though the account owner lived for the entire year. It is often overlooked, particularly when IRA

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The cost of not tracking your IRA contributions

Do you know how much you’re allowed to contribute to your IRA each year? Are you periodically tracking your deposits? Contributing more than the permitted amount can result in costly penalties. Fortunately, there are ways to fix it. How can it happen?  Let’s look at a hypothetical example. In 2016, Ahmad, age 51, set up monthly automatic bank deposits to his traditional IRA that totaled $8,500. However, the IRA contribution limit for 2016 is $5,500, with a catch-up contribution for individuals over 50 of $1,000, for a total of $6,500. Although we believe automatic deposits are the best way to invest for your goals, it’s also an easy way to unintentionally contribute too much to your IRA. You may also end up with an excess contribution if you contribute to a Roth IRA and later discover that your modified adjusted gross income (MAGI) was above the Roth IRA income limit. And because you’re not allowed to deposit money into a traditional IRA for the year you turn 70½ or later, forgetting to turn off automatic deposits or continuing to contribute past that age will also count as excess contributions. Roth IRAs have no age limits for contributions. What can you

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Avoid this fatal IRA rollover error

The IRS allows you to correct most errors. However, there is one error you cannot fix that could seriously harm your retirement funds. It’s a relatively new rule (became effective Jan. 1, 2015), and if you aren’t aware of it, it can cost you dearly. The rule: An individual can only do one 60-day IRA-to-IRA rollover per year (365-day period, not calendar year), regardless of how many IRAs he or she holds. A 60-day rollover refers to when an individual cashes out an IRA and receives custody of the money; they then have 60 days to deposit the money in another IRA before taxes and penalties could be applied. This rule does not apply to direct transfers from one IRA to another. A direct transfer — one in which the money is transferred directly from your IRA with one financial institution to your IRA with another institution — is the preferred method to move your IRA funds. You can do an unlimited number of direct IRA transfers. The IRS considers a check made out to the receiving IRA as a direct transfer so it’s not subject to the one-per-year IRA rollover rule. However, a check made payable to you is

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