Folks who turned 70-1/2 in 2000 must begin to take required minimum distributions from IRAs and other tax-deferred retirement plans by April 1, 2001. The required amount is based on the amount in the account at year-end 1999. The catch is that the second distribution must take place by December 31, 2001, based on the year-end 2000 amount. Persons taking two distributions next year might have that added income push them into a higher tax bracket.
The alternative is to take one distribution in 2000 and one in 2001. They should check with their tax pro before deciding on a year-end move in 2000.
A couple of exceptions: If they’re still working, they don’t have to take distributions from an employer-sponsored plan after age 70-1/2, even though they must take money from their IRA. If they’ve converted their IRA to a Roth IRA (and paid the deferred income tax at the time of the conversion), no distributions are required.