Time for retirement contributions and distributions

As regular readers of the ol' blog know, I'm fixated on retirement.

Maybe it's just because every year about this time, the tax season begins to wear on all of us who are connected to the industry.

I'm sure I am not alone in thinking about being able to not do anything, tax or otherwise!

Maybe it's just because I'm getting older.

Whatever the reason, the topic of post-work taxes has shown up in recent tax tips.

So I thought it might be fun as we're winding down both the day and the week to look at the recent retirement-related Daily Tax Tips.

Socking away retirement money: First, there was the reminder that you can control your retirement by contributing to your retirement plans.

Individual retirement accounts are a great way to get ready for your upcoming post-work years. There are two options.

Many folks choose Roth IRAs, which will provide you tax-free retirement cash.

Some folks, however, opt for traditional IRAs, which might be able to offer immediate tax deductions at filing time.

You can contribute to either type of IRA by April 15 and have it count toward the previous tax year. The maximum for 2013 is $5,500 with another $1,000 allowed if you're 50 or older. Then on April 16 you can put in the same IRA amounts for the 2014 tax year.

Even if you have an IRA of either type, don't forget your workplace plan, such as a 401(k).

Time to take money out: Then there was the alert about taking money out of your retirement accounts.

For folks already enjoying retirement, remember that if you have tax-deferred accounts like a traditional IRA or workplace defined contribution plan, the Internal Revenue Service wants you to take some money out of those accounts each year.

These required minimum distributions, or RMDs, start in the the year that you celebrate your 70½ birthday, six months after your big 7-0 day.

The reason is obvious. The Uncle Sam has been waiting for years as your tax-deferred nest egg grew just out of its reach. Now he wants his cut and even provides you with tables to calculate how much you must take out each year.

But at least you get a bit of maneuverability when it comes to your first required withdrawal. You have until April 1 of the year that follows the calendar year that you turn 70½.

No joke.

And that first day of April deadline is coming up next week. Don't miss it. The penalty is a hefty 50 percent of what you should have withdrawn.

Remember, that if you postponed last year's first RMD until this April Fools' Day, you'll have to take two distributions this year. Your 2014 RMD is due by Dec. 31.

Don't miss older filer benefits: Finally, once you're older, retired or not, don't overlook these 4 four tax breaks for older filers.

They include being able to contribute more to retirement accounts (the $1,000 mentioned earlier plus to your workplace retirement account), a larger standard deduction, the tax credit for the elderly and the less stringent limint on itemized medical deductions.

You also might find these items of interest:

• Handy retirement rollover chart
• Singing the praises of tax-favored retirement savings
• Rethinking retirement as traditional 3-legged stool wobbles

Comments

[Jim Havice]

We talk a lot about tax-deferred and even tax free retirement plans with our clients on our website PAFinancialProfessional.com. We understand they aren't for everyone, but they do indeed serve there purpose for those who can afford them. We highly recommend the book "Tax Free Retirement" by Patrick Kelly for more information on this practically unknown form of retirement planning.