July 1, 2016 is a day that Uncle Sam has been waiting for!
The oldest baby boomers will turn 70 1/2 and will be required to begin taking money out of their tax-advantaged retirement savings accounts. They will also begin to pay the income tax.
Investors tend to leave their retirement savings untouched, to allow them to grow tax-deferred and to receive the maximum benefit possible. However, the oldest boomers will now have to withdraw annual required minimum distributions (RMDs) from their tax-deferred retirement savings accounts.
The penalty for failing to take a required minimum distribution (RMD) is 50% of the amount the account holder was obligated to withdraw!
Some ways to reduce required minimum distributions (RMDs) include staying on the job, donating part of your RMDs to charity, or using part of the RMD to fund a health savings account.
Reference: Why a $2 Trillion Tax Bill Is Coming Due for Baby Boomers, Money Magazine, June 27, 2016