You have done the right thing by saving for retirement with an IRA. IRAs – or individual retirement accounts – are excellent tax-advantaged retirement accounts, and can help you secure your financial future for your golden years.
With a tax-deferred IRA which includes Simple IRAs, SEP IRAs, and traditional IRAs, qualified withdrawals can be made after the owner of the account turns 59½. In a Roth IRA there is the additional stipulation that the IRA must also be open for at least fife years – referred to as the “seasoning” period – before you can begin to take qualified withdrawals.
If you are like most retirement investors, you have been focused on saving for retirement, but may not know where to start withdrawing from IRA accounts at 60 years old. Withdrawing money from your IRA is a two-part process, consisting of a request for distributions from your financial institution, and reporting the withdrawal on your tax return.
Withdrawing funds from your IRA is a big decision, and should be carefully considered before removing any funds from your retirement account. Various IRA accounts have differing rules governing withdrawals, and you should always consult a professional, such as the IRA specialists at ETrade, to avoid costly penalties and taxes.
Withdrawing From IRA Accounts At 60 Years Old: Requesting Distributions
The first step in withdrawing from IRA accounts at 60 years old is to contact your financial institution or check your records to determine your eligibility to make withdrawals. Although with most IRAs you can begin taking distributions at 59½, depending on what type of IRA you own there may be additional requirements for withdrawals.
For a Roth IRA you must have also owned the account for five years prior to receiving distributions on earnings in order to avoid penalties that can eat away at your savings. This restriction does not apply to tax-deferred IRAs.
You can then ask for a distribution from your brokerage by submitting an IRA distribution request form, which vary from institution to institution.
Withdrawing From IRA Accounts At 60 Years Old: Reporting Withdrawals On Your Taxes
When you have begun to receive distributions from your IRA account, you must then report your withdrawals on your income taxes. You must report your distributions on your taxes even if you are withdrawing from a Roth IRA.
You need to file your taxes using IRS form 1040 or 1040A to report the amount of distribution. A 1099-R form will be sent to you from your brokerage that will outline the taxable portion of your IRA distribution.
If you are reporting distributions from a Roth IRA that has been open for less than five tax years, you will need to complete form 8606 part III. This is a form that is used to determine whether your withdrawal includes earnings, contributions, or a combination of the two.
If you are withdrawing only contributions to your Roth IRA, you are able to withdrawal your funds penalty and tax-free. If your withdrawal also contains gains made on your investments, then you will be required to file form 5329 to figure out the amount of money you will own in early withdrawal penalties.
If you will be withdrawing from IRA accounts at 60 years old, it is important to develop a withdrawal strategy that maximizes your returns, and reduces fees, taxes and penalties. If your account is online with a major financial institution such as ETrade, your withdrawal process can be simplified, and you will also have access to the industry’s to retirement advisers to guide you through the steps from start to finish.