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Retirement Fund Conversions

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Sandy Botkin

Co-founder at Taxbot
Sandy is a CPA, Tax Attorney, and former IRS trainer. He has authored many helpful books on the subject of taxes, including 7 Simple Ways to Legally Avoid Paying Taxes ( Click Here ), Lower Your Taxes: Big Time ( Click Here ), and Real Estate Tax Secrets of the Rich ( Click Here ).
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Investing in an IRA or 401(k) or other tax-deferred plans means you get years of tax deferred growth. However, you will have to start taking money out and give IRS its cut when you turn 70 1/2. If you fail to make these minimum distributions, there is a HUGE 50% penalty of the amount that you should have withdrawn. Ouch!

Generally, your plan administrator will help ensure that you take out the required amounts. You will usually have to take out the required amounts by December 31 of the year that you reach age 70.5, but you do have until April 1 of the year after you reach 70.5 to be precise. However, delaying your withdrawal means that you will have to make two required minimum distributions that year, which could put you in a higher tax bracket.

Another option would be to convert your IRAs and 401Ks to Roth IRAs. Yes, you would be taxed on the conversion, but all funds can stay in the Roth for as long as you wish tax free.

Please keep all this in mind if you are turning age 70 1/2, and see a good financial professional about this.


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Sandy Botkin

Sandy is a CPA, Tax Attorney, and former IRS trainer. He has authored many helpful books on the subject of taxes, including 7 Simple Ways to Legally Avoid Paying Taxes ( Click Here ), Lower Your Taxes: Big Time ( Click Here ), and Real Estate Tax Secrets of the Rich ( Click Here ).