IRA Minimum Distribution Requirements Likely to Return This Year

Congress suspended the required minimum distributions for IRA, 401(k) and other retirement plan investors age 70-1/2 last year, since people’s balances took such a hit the year before and many wanted to remain invested in hopes of a rebound. As the market has, indeed, rebounded nicely, Congress is likely to reinstate the RMDs this year, experts say.

The IRS calculates a person’s expected lifespan beginning at age 70 and asks investors to divide their remaining IRA balance by that figure to determine a minimum amount they must withdraw from their account each year. If not, investors are subject to a 50% penalty. Currently, a person age 70-1/2 must divide their balance by 24.7.

“We do not see Congressional interest yet in suspending the RMD rules for 2010,” Clint Stretch, managing principal for tax policy at Deloitte, told The Wall Street Journal. In particular, the government is concerned about the projected federal budget deficit.

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