IRA Changes for 2009

The Worker, Retiree and Employer Recovery Act of 2008 provides a waiver of the required minimum distribution (“RMD”) rule for 2009. This rule allows individuals who are otherwise required to take annual distributions from their IRA accounts to avoid taking their distribution for the 2009 tax year. The purpose is to allow taxpayers whose retirement accounts have declined during the market difficulties to grow tax deferred for another year, before resuming the normal RMD rules in 2010.

The temporary rules apply to IRAs and other defined contribution plans such as 401(k)s. In addition to retirees, the provisions also apply to other account beneficiaries, such as IRA inheritors, who would otherwise be required to take an annual distribution. The rules do not apply to defined benefit plans.

For retirees and others who can afford to skip their 2009 distributions, this will result in substantial tax savings for next year, as well as allowing for some measure of portfolio recovery as the financial markets (hopefully) return to normal.

If you have questions about these new rules and how they will apply to you or your tax circumstances, please let us know. We’ll be happy to help.

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