Great news for retirees: The Worker, Retiree, and Employer Recovery Act of 2008, which was signed into law in late December, suspended the minimum required distribution rules for traditional IRAs and qualified retirement plans for the 2009 tax year. That means seniors who are 70 ½ or older are not required to withdraw money from their retirement accounts this year.
Not only will seniors avoid having to pay taxes on the withdrawal, but they can also keep their retirement account intact so it's better poised to recover when the market does. Plus, withdrawing money now could be detrimental to a retiree's nest egg over the long term: Tapping your savings in a year when the market underperforms could deplete your savings much sooner than expected.
There’s one caveat to consider regarding the required minimum distribution rules. Seniors who turned 70 ½ in 2008 and who have until April 1, 2009, to make their minimum required distribution still need to do so. Although it may feel like a 2009 withdrawal, it’s technically for 2008 and the MRD rules are still in effect for last year.
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