Pay attention to the required distribution rules for traditional IRAs.
Folks age 70½ and older must take withdrawals by year-end or pay a penalty
equal to 50% of the shortfall. You start with your IRA balances as of Dec. 31, 2015,
and divide each one by the factor for your age, which you can find in IRS Pub. 590-B.
A higher factor applies if you are more than 10 years older than your spouse.
The sum of these required withdrawal amounts can be taken from any IRAs you pick.
(Similar rules apply to payouts from 401(k) plans, except that people owning 5% or less
of a company who work past age 70½ can delay taking payouts until they retire,
and the minimum required distribution must be taken from each retirement plan.)
If you’ve turned 70½ this year, you can delay 2016’s payout till April 1, 2017.
This special rule doesn’t apply for account withdrawals in subsequent tax years,
and the payout for 2016 is still based on your total IRA balance as of Dec. 31, 2015.
Take care if you decide to defer the payout to 2017. If you choose this option,
you’ll be taxed in 2017 on two distributions: The one for 2016 that you opted to defer
and your payout for 2017. This doubling up could push you into a higher tax bracket.