Retirement Accounts Made Simpler
WASHINGTON (AP) _ Rules governing distributions from retirement accounts like IRAs and 401(k)s will be simpler and amounts required to be withdrawn could be reduced under regulations announced by the Internal Revenue Service.
The rules will substitute a single life expectancy table for a complex series of tables used to determine the amounts to be distributed from a retirement account. The old rules dating to 1987 were frequent targets of complaints, said IRS employee plans manager Dick Wickersham.
``We knew we had something that was hard for people to comply with,″ Wickersham said Tuesday. ``We tried to come up with rules that were simple and that we could implement.″
The upshot will be a simpler calculation that will effectively lower the minimum amount many taxpayers have to withdraw each year, said Stephen Silverberg, partner at the Garden City, N.Y., law firm of Silverberg & Hunter.
``More money may be left in IRA accounts to grow tax-free,″ Silverberg said.
Other changes include:
_Retirement account holders must have a beneficiary in place by Dec. 31 of the year after death. Previous rules required that the beneficiary be in place at the time payments begin at age 70 1/2.
_Following the death of an account holder, a beneficiary can take the distributions over his or her life expectancy. The old rules required that a non-spouse beneficiary take the distribution over five years.
_The retirement account custodian or trustee is required to report to the IRS the balance in an IRA as well as the required minimum distrubution. Previously, the report was voluntary.
Although the rules are scheduled to become permanent in 2002, Wickersham said the IRS will allow taxpayers to use them beginning in 2001 _ meaning they are actually already in effect.