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Time is running out to fix this IRA mistake and avoid a 50% penalty

Time is running out to fix this IRA mistake and avoid a 50% penalty
Retirees who forgot to take the required minimum distributions from their traditional IRA last year will owe the IRS a tax penalty equivalent to 50% of the RMD amount on top of income taxes, according to this article on CNBC. They usually remember the missed mandatory distributions when they start working with their tax preparer on their returns. Retirees are advised to take the RMD as soon as they discover it so they can ask the IRS for a waiver of the penalty. “If you correct it right away and take the distribution out, you can request a waiver of the penalty on your tax return," says a CPA.

IRS building
The Internal Revenue Service Building in Washington, DC is pictured on March 15, 2005. Photographer: Dennis Brack/Bloomberg News.

A ‘substantial’ number of baby boomers jeopardize their retirement by doing this
A big number of baby boomers are helping their adult children financially to buy a home, a move that could hurt their retirement prospects, according to this article on MarketWatch, citing a report from financial services firm Legal & General. “After decades of work and saving, there’s a substantial proportion of baby boomers giving up luxuries and facing a less certain retirement to help their children,” says the report. Just “when older workers and retirees are planning or enjoying their retirement years, they’re having to make real sacrifices to help secure the future of their children and grandchildren, too.”

Americans overlooking this key part of retirement
Many clients failed to develop a withdrawal strategy when planning for retirement, according to this article on Fox Business, citing a survey by Kiplinger. “Americans are often focused on, what’s my number or how much do I need to save by the time I’m 65, 66 or whenever you decide to retire,” says an expert with Kiplinger. “Unless you are deliberate about how much money you are withdrawing every year and you watch those totals and what the market is doing, you are shooting in the dark.”

Three ways retirees can set themselves up for success
Clients who want to improve their retirement prospects are advised to use their financial goals to direct their strategy and not their assets, writes a Forbes contributor. Clients should also plan for a 100-year lifespan and start developing a withdrawal strategy using the 4% rule, the expert writes. “Aside from saving, one of the most important things you can do is have a solid retirement plan in place. Knowing your goals, concerns and finances can go a long way toward giving you the confidence to enjoy retirement.”

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