From
Your Perspective:
Managing your retirement nest egg
Withdrawal strategies
You may begin to withdraw from your
rollover IRA,
traditional
IRA,
or retirement savings account without penalty when you turn 59 1/2. And you must begin withdrawing by April 1 of the year following the year you turn 70 1/2. If you’re still working when that milestone arrives, you can postpone the withdrawals — and keep on contributing — until you actually retire (although you can’t postpone if you own more than 5% of the company).
When you’re ready to begin taking money out of your IRA, you either identify the
assets
you’ll sell each time or you set up an automatic distribution plan. In the first case, you may decide to hold onto assets that are growing in value and sell those that aren’t performing as well. In the second case, you may agree to have fixed percentages of all the assets in the account sold on a regular schedule.
If you leave your money in your employer’s plan, you don’t make the liquidation decisions or arrange the payout.
Where the numbers come from
If you’re curious about why the government chose the withdrawal bookmarks of 59 1/2 and 70 1/2 instead of the less complicated 60 and 70, here’s the reason: Actuarial tables used by insurance companies and the IRS consider you already 60 when you turn 59 1/2 and still 70 until you’re 70 1/2.
You may find that your employer’s plan limits your flexibility in making withdrawals. For example, you may not be able to take money out of your account while you’re still working and contributing to the plan even if you’re older than 59 1/2. Or you may be required to begin taking distributions when you actually retire, even if you’re only 62 or 65.
While you can’t do much about the start date unless you leave your job, choosing a rollover IRA may make sense when you retire. Then you can decide when you’ll begin taking money out, as long as you don’t miss the deadline of April 1 of the year following the year you turn 70 1/2.
