The year an IRA owner turns 70 1/2, he or she must withdraw a specified fraction of the total IRA holdings or face an outrageous penalty of 50 percent of the amount NOT taken out. Yet more than 250,000 people fail each year and pay the penalty.

(There is a legal option the first year to delay distribution until April 1 of the following year, but two payouts that year may bump the IRA owner into a higher tax bracket and surtaxes.)

How much must you take out? The required minimum distribution—see IRS Pub. 590 or a list from various financial services—starts with your IRA balance of the previous December 31 divided by a factor determined by your age. There will be a higher factor for those who are more than 10 years older than a spouse.

If you have multiple IRA accounts, the distribution may be taken from any of them, as long as the total adds up to the required minimum distribution for that year.

For nearly 30 years, Mike Nickerson has owned and managed a small, full-service accounting practice in the Midcoast. He holds a bachelor's degree in accounting from University of Southern Main and a master's degree in financial planning from Bentley University.

He is a past board member and president of the Maine Society of Certified Public Accountants and currently serves on the Maine Board of Accountancy.

An aged rock musician, Nickerson now finds musical enjoyment playing upright and electric bass in a variety of bands spanning folk to jazz music genres. He and his wife have three grown children, and they enjoy their free time hiking, kayaking, golfing, bicycling and motorcycling.

http://www.nickersonpa.com/