Retirees who turned age 70½ last year are running out of time to avoid one of the tax code's more draconian features: the 50% penalty for failing to take mandatory "Required Minimum Distributions" (RMD) on any applicable retirement accounts.
A person's first RMD has to be taken out no later than April 1 of the year after they turn 70½. For those of you scoring at home, that gives you until next Tuesday to get it done. If you are among those who turned 70½ last year, but have already taken withdrawals that equal or exceed the amount of your first RMD, you're in the clear and can ignore next week's deadline. For those in this camp, the next deadline to watch is December 31, 2014. That's when your second RMD must be taken by.
One reason advisors like Roth IRAs so much is Roth's are unaffected by RMDs. Here's a summary of how to calculate your RMD, from a recent MarketWatch article on the April 1 deadline:
The RMD amount that you must withdraw by April 1 equals the combined balance of all your traditional IRAs divided by a life-expectancy factor based on your age as of Dec. 31, 2013. Take that number and subtract any traditional IRA withdrawals you took during 2013. The remainder is what you must withdraw by April 1 to avoid the 50% penalty for failure to comply with the RMD rules. For full details on how to calculate RMDs and all the other RMD rules, see Understanding the IRA Withdrawal Rules.