Understanding how IRA withdrawals work can help you avoid any unnecessary fines or fees as part of your retirement planning. The IRA is designed to help you save for retirement, but you have to follow the rules. Here are a few things to consider about IRA withdrawals and how they work.
When you have an IRA, it will get to a point that you will have to take mandatory withdrawals on your account. Once you reach the age of 70 1/2, the government requires you to take out a certain amount of money each year. If you fail to take this money out, you will have to pay 50% of the amount that you did not take out. This is designed to increase tax revenue from those with IRAs.
Another rule surrounding IRAs is the 60-day rule. This rule states that you have 60 days to roll your funds over from one IRA to the next, if you are in charge of the transfer. If you fail to deposit the money from your old IRA into a new IRA within 60 days, you will have to pay a 10% penalty on the money and pay income taxes on the money for the year.