After reaching age 70 1/2, owners of traditional IRAs fall victim to the required minimum withdrawal rules. You must take annual withdrawals of specified amounts (at least) and pay the related federal and state income tax hits. Thankfully, if you own a Roth IRA, it’s exempt from the required minimum distribution rules for as long as you live. So if you own nothing but Roth IRAs, you can skip this article.

Beneficiaries of inherited traditional and Roth IRAs fall under a separate set of required minimum withdrawal rules.  Failure to withdraw at least the required amount for the year means getting socked with a 50% penalty on the difference between what should have been withdrawn and what is actually withdrawn (if anything). This is one of the most brutal penalties in our beloved Internal Revenue Code.  You should speak with your financial planner about your retirement planning if you don’t have a plan yet or about converting your old plan to a Roth IRA.