BACK TO THE OLD RULES ON PENSION DISTRIBUTION

In 2009 Congress changed the rules on distributions from retirement plans for people over 70 ½ which said that they could skip taking a distribution if they so desired. Unfortunately, Congress did not extend the waiver beyond 2009 so required minimum distributions from IRAs and plans resume this year. Taxpayers that turned 70½ in 2009 needn’t take any payout for 2009 by April 1, 2010, but they must take a distribution for 2010 by Dec. 31, 2010. Withdrawals for 2010 are based on Dec. 31, 2009 balances.

Heirs stuck with the five-year payout period get an extra year because the five-year span is calculated without regard to 2009. So if an IRA owner died in 2004, heirs have until Dec. 31, 2010 to clean out the IRA.

HUGE LOSSES THROW PUBLIC PENSION FUNDS INTO CRISIS

Losses of $1 trillion on investments by U.S. state and local pension funds covering police officers, teachers and other government employees are forcing managers of the retirement plans into a difficult choice. They must either try to boost returns by taking on even riskier investments or start cutting benefits. An analysis by PricewaterhouseCoopers concludes that within an average of 15 years, public pension funds will have less than half of the money needed to pay promised benefits. The Washington Post

QUESTION ON 2008 PENSION DISTRIBUTIONS

A few days ago you posted a item telling a person that he could run back his 2009 IRA. Can I do the same thing with the $4,000.00 I took out in 2008?

Yvonne

Sorry Yvonne, the new rules are for 2009 only.

Larry Kopsa CPA

EARLY WITHDRAWAL FROM RETIREMENT ACCOUNTS CAN BE REALLY EXPENSIVE

I have received a lot of questions lately from people that are considering taking cashing out of their pension plans before retirement. The taxes and penalties triggered by early withdrawals from 401(k)s and IRAs can be quite harsh.

The attached article from the Wall Street Journal provides a good summary of the costs involved.

The Wall Street Journal/Dow Jones Newswires (5/6)

IMPORTANT PENSION INFORMATION

IF YOU ARE OVER 70 ½ AND HAVE NOT TAKEN YOUR REQUIRED MINIMUM DISTRIBUTION FROM YOUR PENSION, THIS IS IMPORTANT

Required payouts from IRAs and plans may yet be waived for 2008, even though Congress decided not to do anything for this year. In light of the stock market’s decline this year, lawmakers considered not requiring folks who are at least 70½ to take payouts for 2008. That way, they wouldn’t be forced to sell investments in their plans with the market near the bottom. New legislation that may be taken up in Dec. would waive payouts for ’09. That’s no help for 2008. Treasury is still seriously considering providing relief for 2008 payouts. Our advice is to delay withdrawals to late Dec. if you don’t need the money. That way, you can take out less if Treasury decides that it can ease the payout rules.