Observations on life

THE STOCK MARKET WILL CRASH ON DECEMBER 31st … wishful thinking

If you reached age 70 during 2013, like me you may be hoping that the stock market takes a good dive on December 31, 2013 … and then fully recovers on January 2nd.

Why you make ask? Good question! It’s because for old duffers like me, you must make your first minimum distribution from your IRA or 401(k) plan in 2014 (excluding Roth plans). Of course, the same thing holds true in subsequent years as well.

If you are ready to make a withdrawal or you need to make a withdrawal, none of this may matter, you may wish to receive as much as possible and of course, you can always take more than the required minimum in any case.

However, if you are not ready to make withdrawls from your plans and would rather let the money accumulate further, let’s hope the minimum withdrawal is helped by a lower account balance on December 31 and just December 31. For required distributions the year you turn 70-1/2 the account is valued on the previous December 3⃣1⃣

If you did turn 70 in 2013 in lieu of taking your withdrawal in 2014, you can wait until the April following reaching age 70-1/2 but if you do that, you will be making two withdrawals in 2015. Just something to think about.

Keep in mind that any withdrawal you make will be added to your income and that could affect any income related benefits you receive. Various tax benefits could be affected and you may find that because of the withdrawal your Medicare Part B and Part D premium may jump as well.

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3 replies »

  1. Dick, thanks for this information. I am not there yet but do you know how they calculate the minimum distribution (withdrawal) that is, the amount you must take out from your 401k account once you reach the age 70 1/2 threshold and each year thereafter?

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    • It’s a prescribed IRS formula. You can Google “Minimum distribution calculator” and you will find a site where you can put in your info and see the minimum amount.

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  2. Of course, if the market did crash, the “brilliant” federal overlords decree that your pension is less well funded, perhaps underfunded, perhaps triggering added pbgc premiums and negatively impacting your corporate financials as well.

    It is the nature of the regulatory beast. For example, I was born on July 3 rd – so I get a whole added year before my first payout, compared to my cousin who was born same year, but on June 26.

    All makes sense. Don’t it!

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