Individual retirement accounts and 401(k) plans : early withdrawals and required distributions / Patrick J. Purcell.

Format:

Book

Author/Creator:

Purcell, Patrick J., author.

Series:

CRS report for Congress ; RL31770.

CRS report for Congress ; RL31770

Language:

English

Subjects (All):

Individual retirement accounts--Law and legislation--United States.

Individual retirement accounts.

Pension trusts--Taxation--Law and legislation--United States.

Pension trusts.

Physical Description:

1 online resource (15 pages).

Place of Publication:

Washington, District of Columbia : Library of Congress, Congressional Research Service, 2008.

Summary:

If a distribution occurs less than five years after the conversion, the amount that was taxable in the year of the conversion will be subject to the 10% early withdrawal penalty unless the account owner has reached age 591⁄2.7 4 The income limit for converting a traditional IRA to a Roth IRA is lower. [ ... ] The distribution must be used to purchase, build, or re-build the principal residence of the account owner, the account owner's spouse, or the parent or grandparent, or the child or grandchild of the account owner or the account owner's spouse. [ ... ] The distributions also (1) must be paid at least once each year; (2) must be based on the life expectancy of the plan participant or the joint life expectancy of the participant and a designated beneficiary; and (3) must not be modified before the later of five years after the first distribution or the date on which the plan participant reaches age 591⁄2. [ ... ] Under the amortization method, the amount of the annual distribution is based on the account owner's remaining life expectancy in the year of the first distribution and a "reasonable" rate of interest. [ ... ] The two relevant variables for determining the distribution amount under the minimum distribution method are the account balance and the account owner's remaining life expectancy, which for a 55-year-old is 29.6 years.20 If we assume an account balance of 100,000 dollar on September 30, 2008, the first-year distribution would be 3,378, dollar which is derived by dividing the account balance by the 18 A presen.

Notes:

Description based on publisher supplied metadata and other sources.