Tax time for retirees
"Maybe you thought your tax prep would get less complicated once you stopped working," writes Jill Schlesinger, "but preparing taxes in retirement can be quirky." For one, when you turn 70-and-a-half, you must take Required Minimum Distributions (RMDs) from retirement accounts (other than Roth IRAs). To clarify: This means that you must begin withdrawing funds from your retirement accounts by April 1 of the year following the year in which you turn age 70-and-a-half. For all subsequent years, including the first RMD year, you have to take your distribution by December 31. "To calculate your RMD," writes Schlesinger, "take the December 31 balance of your IRA or retirement plan account and divide it by your life expectancy factor, found in the ever-fascinating IRS Publication 590." Other things to consider during pre-tax season: potential taxation of Social Security benefits, a possible credit for the elderly or the disabled, and the potential to take deductions for medical expenses and long-term care premiums.
Source: Chicago Tribune, LifeHealthPro.com
Looking to 70-and-a-half, a magic number in retirement plans
However stout your tax defenses, there is almost no avoiding the levy against retirement plans for the year you reach 70-and-a-half, when you must start withdrawing cash from IRAs and 401(k) plans and paying ordinary income tax on it, writes Robert Hershey. In addition to a possible increase in ordinary tax rates, the 3.8 percent Medicare payroll tax will start next year to apply to capital gains, dividends and other investment income for joint filers with at least $250,000 in income. Retirement distributions are excluded from the Medicare tax but still must be included in calculations of the $250,000 threshold.
Source: New York Times, LifeHealthPro.com
The percentage of seniors in the labor force rose
from 4.3% in 1990 to 7.5% in 2011.
Source: Bureau of Labor Statistics
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