Many people are confused about whether they can contribute to their plan or when they have to start plan distributions once they reach age 70 ½.  Listed below are the common retirement plans in use by most people today and a summary of the respective plan contribution and distribution rules.

            

Plan Type Contribution Allowed In Year
Age 70 ½ is Reached
Distribution Required In Year
Age 70 ½ is Reached
Traditional IRA No Yes
Roth IRA Yes* No
Simple IRA

Yes** Yes
SEP IRA

Yes** Yes
401K

Yes** No***
Roth 401K

Yes** No***
TSA/403(b)

Yes** No***
457(b)

Yes** No***

 

*– must have compensation as defined by the IRS, see IRS Publication 590.

**–must be actively employed by the plan sponsor and subject to their rules, see IRS Publications 560 and 571.

***–must start receiving distributions by April 1 following the year you retire or attainment of age 70 ½, whichever is later.  Special case rules could allow deferrals until age 75 on TSA/403 (b) for plans before 1987.

For more detailed information on contribution and distribution amounts, speak to your financial advisor and/or tax professional.  Information is also available through a search on www.IRS.gov.

If you do not take a distribution that is required, the IRS will impose a 50% excise tax on the difference between the required minimum distribution and the amount actually distributed.

This was written by George S. Urist, MBA, CFP®, President and Owner of Urist Financial and Retirement Planning, Inc., located in East Syracuse, New York. George has been a CERTIFIED FINANCIAL PLANNER™ practitioner and Registered Representative with LPL Financial for over 27 years. George can be followed on twitter @gurist and reached at 315-445-2147 or george.urist@lpl.com. Company information can be found at www.uristfinancial.com. Securities offered through LPL Financial. Member FINRA/SIPC