You Must Start IRAs Draws at Age 70 1/2
Jan 26, 2014
We had a reader ask the following questions:
"As I understand the requirement for the IRA withdrawal at age 701/2. If the person is still working at 70 1/2 then it is not necessary to draw from your IRA. Is this true? Another question can a farmer for 2013 expense the full cost of a machine shed as long as you are not exceeding the $500k limit."
These are two separate questions, but I will answer both. When a farmer has an IRA and reaches age 70 1/2, they are required to start taking their required minimum distribution (RMD). Now, there are two options regarding when you first reach this age. You can either take your first distribution in the year you reach this age or delay it for one year and then take it the following year. However, when you delay it for one year, in the second year you will be required to take two distributions, the one from the previous year plus the current year required RMD.
Normally, we suggest that farmers take it in the first year so they do not bunch up their income in the second year. In some cases, if you are still working and covered by a retirement plan (and do not own more than 5% of the company), you may not need to take a RMD out of that retirement plan until you retire, but you will always be required to take it out of your IRA beginning at age 70 1/2. The penalty for not taking it can be steep. It is 50% of the RMD for that year.
For the second question, a farmer may build a machine shed in 2013 and deduct 50% of it using bonus depreciation. However, a machine shed is not eligible for the Section 179 deduction which is limited to $500,000. Therefore, the reader will be able to take an immediate deduction of 50% of the machine shed cost and depreciate the remainder over 20 years. He will still have his full $500,000 Section 179 limit to use on other farm equipment.