Financial Focus with Robert

Q. Robert, I am 73 years old and have been taking my RMD’s out of my IRA each year as required. But lately my brokerage account has lost a lot of money due to the declining stock market. I have lost much more just this month in value than my annual RMD is scheduled to be. Why do I have to keep taking money out, which just makes my account even lower? Are there any exceptions to this rule? – Paul in Winston Salem

A. Paul, you are required to take out your RMD’s (Required Minimum Distributions) each year regardless of the profit or loss of your IRA. If you fail to do so, the IRS can penalize you up to 50% of the RMD calculated amount. The calculated amount is based on the fair market value of your IRA as of December 31st of the prior year. However, there are some exceptions.

One exception is Roth IRAs. You are not required to take RMD’s from your Roth IRA during your lifetime, and you cannot satisfy your Traditional IRA requirement with a withdrawal from a Roth IRA.

Another exception is retirement plan accounts, if you are still working. If you continue to work beyond age 70 and a half, and do not own more than 5% of the business you work for, you may be able to defer taking RMD’s from your current employer’s Keogh, 401K, 403B, or other employer-sponsored retirement plans until April 1st of the calendar year in which you retire. You would have to consult your plan administrator to learn more.

My concern is if you are losing so much money, your portfolio is not properly diversified. I mean that you have too much at risk for a 73 year old. You should have some type of plan set up to minimize downward market trends.

Keep the questions coming at rdcooper@globalfinacialpc.com. Call 336-993-2012 for a complementary consultation with Robert.

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