ANSWERS: 1
  • Individual Retirement Accounts (IRA) are retirement funds designed to accumulate money until a certain point in the owner's life, when the fund begins to make payments back each year, known as disbursements. American IRAs are legally required to make disbursements when owners or beneficiaries of the IRA turned 70 1/2, although there are some exceptions for different types of IRAs and the legal contracts surrounding them. Generally, it is difficult to return retirement IRA disbursements after the beneficiary has reached the age limit.

    2009 Exceptions

    In 2008 a law was passed that issues a waiver for all 2009 IRA disbursements. In effect, this law allowed anyone receiving a payment from an IRA account to stop it, keeping the money in the account for that year or allowing people to send the disbursement back. This law was passed in an effort to increase the economical standing of the banks holding the IRA accounts and improve the overall economy. The waiver applied only to 2009 disbursements, and not to any other year. If a similar law is passed for another year, the IRS will post notification on its website and include details in the new tax laws. The banks should also send all beneficiaries notice of any similar waivers.

    Other Possible Exceptions

    Once a person has reached the 70 1/2 year age limit, he cannot simply refuse to take the disbursements. Legally, the disbursements are required, and only in very rare circumstances, usually involving the IRA passing from one person to another, may they not be paid. However, there are ways to reinvest the disbursement, once it has been made. The most common way to do this is by rolling over the payment. Rolling over disbursements is seen most often in only specific IRAs that have legal contracts to contribute to another IRA fund, but you can choose to use this same loophole to contribute the disbursement back into your old account. The key is return the distribution within 60 days. After this cut-off date the distribution is final and you will be taxed on it. You should also note that there are limits to how much you can contribute to an IRA every year, usually around $5,000 to $6,000, and if you go beyond this amount, the extra will be taxed and then returned to you.

    Source:

    IRS.gov: Traditional IRAs

    IRS: IRS Issues Guidance on 2009 Required Minimum Distribution Waiver

    LiveStrong: Roth IRA Disbursement Rules

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